Overstock sues Major Brokerages for $3.48 Billion in Damages

[mandy]

Press release:

Overstock.com Announces Lawsuit Against Prime Brokers

Seeks $3.48 Billion in Damages

Overstock.com, Inc. announced today that it has filed a lawsuit in the Superior Court of California, County of San Francisco against Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York, Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., UBS Financial Services, Inc., and others. Certain shareholders of the company have joined Overstock.com in the suit.

The suit alleges that the defendants, who control over 80% of the prime brokerage market, participated in a massive, illegal stock market manipulation scheme and that the defendants had no intention of covering such orders with borrowed stock, as they are required to do, causing what are referred to as "fails to deliver." The suit also alleges that the defendants' actions caused and continue to cause dramatic distortions with regard to the nature and amount of trading in the company's stock which have caused the share price of the company's stock to dramatically drop. The suit asserts that a persistent large number of "fails to deliver" creates large downward pressure on the price of a company's stock and that the amount of "fails to deliver" has exceeded the company's entire supply of outstanding shares.

The suit accuses the defendants of violations of California securities laws and common law, and California's Unfair Business Practices Act. The company is seeking damages of $3.48 billion.

"I have a fiduciary duty to defend the company. These manipulative activities have caused tremendous damage to Overstock," said Patrick Byrne, chairman and chief executive officer of Overstock.com. "I believe that this conduct is harming our company and our shareholders deeply, and that investors have been failed by those who have a duty protect them. The best way to address and solve the problem is to get it in front of a jury of 12 Californians."

full article: http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=958021&highlight=

[mandy]

Overstock.com Inc., an online discount retailer, said director John Fisher resigned because he opposed the company's $3.48 billion lawsuit against brokerage firms.

Fisher's departure comes about three weeks after Overstock sued Morgan Stanley, Goldman Sachs Group and other brokerages for allegedly causing the company's shares to fall almost 75 percent since the end of 2004 by manipulating the stock market. Fisher, a former banking executive, had been on the company's board since May 2002...

''My resignation is precipitated by my disagreement with the company's pursuit of the lawsuit,'' Fisher wrote in a letter to Chief Executive Officer Patrick Byrne that was included in a regulatory filing Friday...

full article: http://www.sltrib.com/business/ci_5295351

[mandy]

A related article:

Utah's legislature is about to repeal a controversial 2006 law designed to make it harder for brokerage firms to look the other way in cases of abusive short-selling.

On Tuesday evening, the governor's office sent a letter to the state's speaker of the House and the majority leader in the Senate asking that the law be repealed, citing concerns that enforcement of it would bring a torrent of legal action and possibly make it harder for Utah and other states to regulate the activities of brokerages...

Salt Lake City-based Overstock.com was the law's chief proponent last year, and its hired lobbyists have been working furiously to prevent its repeal in the last few weeks...

full article: http://www.forbes.com/home/business/2007...naked.html