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Herb On The Street: Overstock Outrage

Published: Wednesday, 25 Jun 2008 | 10:51 PM ET

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By: Lee Brodie
Web Editor

Overstock
Overstock.com and its outspoken leader are going after some big fish on Wall Street. Overstock Chief Executive Patrick Byrne has filed a $3.4 billion lawsuit against brokerage firms alleging a “massive, illegal stock market manipulation scheme.” The suit has left some power players fit to be tied, including Marketwatch.com columnist Herb Greenberg. As fate would have it, our cameras were rolling on Greenberg's fit.

According to Reuters, Overstock.com Inc. [OSTK Loading... () ]on Friday sued at least 10 major U.S. brokerages, seeking $3.48 billion in damages for what it called their deliberate attempt to drive the discount online retailer's stock price down.

The accusations of stock price manipulation are the latest by Overstock Chief Executive Patrick Byrne, who made headlines in 2005 when he accused a group of hedge funds, financial journalists and regulatory agencies of conspiring to drive down Salt Lake City-based Overstock's share price.

Wes Christian, a partner at Houston law firm Christian, Smith & Jewell, which represents Overstock, said in an interview the brokerages "perpetrated a number of schemes to create an artificially high supply of stock relative to demand."

“What’s sandwiched between all of this is Overstock’s 4Q earnings which were just terrible! Abysmal!!” said Herb Greenberg emphatically on CNBC’s “Squawk Box.”

“What has caused damage to Overstock is just poor management,” Greenberg added as he pounded on the desk (not really) “If Patrick weren’t the largest shareholder of this company… he’d be out of there!!!”

(In case you're wondering, Greenberg doesn't give much credence to the lawsuit.)

The defendants include Bank of America Corp., Bank of New York Co., Bear Stearns Cos., Citigroup Inc., Credit Suisse Group Inc., Deutsche Bank AG, Goldman Sachs Group Inc., Merrill Lynch & Co., Morgan Stanley and UBS AG.

Is it a coincidence that these conspiracy hunts take place around earnings time?

“He claims it’s not.: barked Greenberg as foam gathered on his lips (again, not really). And by the way if they ever found that prime brokers were involved in something like this, it would be a huge story!”

Greenberg also sounded off about another figure in the business world, Parlux’s [PARL Loading... () ]CEO Ilia Lekach, the maker of Paris Hilton perfume.

Lekach resigned as part of the company's settlement of a dispute with a major shareholder seeking to replace the company's board. Parlux stock surged on the news.