GRADIENT/ROCKER LAWSUIT - Frequently Asked Questions

  1. Overstock.com vs. Gradient Analytics, Rocker Partners, et al.
  2. Patrick and Business Journalists
  3. "Miscreants' Ball" and the Sith Lord

Overstock.com vs. Gradient Analytics, Rocker Partners, et al.

Q: What is Overstock's lawsuit against Gradient Analytics and Rocker Partners about?

A: Our lawsuit claims that 1.) Rocker paid Gradient for a series of false and disparaging reports about Overstock, 2.) Gradient allowed Rocker to review and edit the so-called "independent" reports before releasing them, and 3.) Gradient timed the release of the reports so that Rocker could profit on trades, as could Gradient (through hedge funds it secretly controlled).

Q: How does Overstock know this occurred?

A: Eight former Gradient employees who witnessed the illegal conduct have come forward with affidavits and testimony explaining how Gradient, Rocker and Herb Greenberg of MarketWatch.com, carried out the fraud.

We also have other supporting information that we are not disclosing publicly at this time.

Q: Why did Overstock file the lawsuit?

A: What Gradient and Rocker are doing is illegal and harms Overstock investors and, at least as importantly, the public markets in general: we have a fiduciary and social duty to fight it.

Q: Gradient Analytics issued a statement that it has become the subject of a "non-stop intimidation and harassment campaign" orchestrated by Overstock.com Inc. Chief Executive Patrick Byrne. How do you respond?

A: Gradient's statement was shameless rhetoric. Gradient has written reams of false reports on Overstock and conspired with at least one journalist to denigrate our business; yet, now that we have a voice in court, Gradient claims harassment and intimidation. If Gradient has done nothing wrong, then it should welcome the discovery phase of our lawsuit: let the facts speak for themselves.


Patrick and Business Journalists

Q: Was Overstock behind the SEC subpoenaing business journalists?

A: No.

Q: Has Overstock been subpoenaed?

A: Yes. We received a subpoena from the SEC on May 9, 2006. Prior to receiving the subpoena, we were already cooperating fully with various agencies, including the SEC.

Q: Is Overstock being investigated by the SEC or other agencies?

A: The SEC is conducting an investigation on Overstock.com (see previous question). We are not aware of other investigations by any other agencies.

Q: Are the subpoenas an infringement on these journalists' First Amendment rights?

A: Again, Overstock is not behind the subpoenas and we do not know what the subpoenas are about. That said, in our view, the First Amendment is sacrosanct and journalists (or anyone else for that matter) should be free to write or say whatever they want. There is a clear difference, though, between free speech and illegal conduct: journalists are not above the law and should not be permitted to hide behind the First Amendment while engaging in illegal conduct.

Q: What does your company's president have against financial journalists?

A: He has nothing against financial journalists in general. A few financial journalists' reporting on Overstock appears to be deliberately biased, misleading or dishonest, and based on rumor and speculation, not facts. We've also learned that at least one writer - Herb Greenberg of MarketWatch.com - may have intentionally and falsely disparaged Overstock so that David Rocker could profit on his short position in Overstock.

"Miscreants' Ball" and the Sith Lord

Q: What was the purpose of Patrick's "Miscreants' Ball" presentation?

A: The purpose of the conference call was to lay out our lawsuit and what we knew about Gradient's and Rocker's activities, as well as to provide broader context surrounding the suit.

Q: Since that presentation, the company president has been portrayed by some journalists as a conspiracy theorist. How do you respond?

A: Dr. Byrne's conference call clearly hit a nerve. How else could one explain the concerted and vicious retaliation it drew? Those who say Dr. Byrne is a conspiracy theorist are simply trying to obfuscate the issue and protect a corrupt system that enables virtually risk free profits at the expense of entrepreneurial businesses and ordinary, hard working investors.

Anyone following this is advised to tune out the rhetoric and look at the facts, then decide for themselves.