Overstock.com's (OSTK) - Get Report battle against a stock-research firm and short-sellers appears to have come close to sparking a First Amendment fight involving business journalists and the federal government.
According to weekend media reports, the
Securities and Exchange Commission
earlier this month issued a subpoena to Herb Greenberg, who writes for
Web site, and Carol S. Remond, a columnist at
Dow Jones Newswires
. Greenberg formerly wrote for
But after reporters working on stories Friday questioned the SEC about the subpoena, the agency appeared to back off, saying it had decided not to enforce the subpoena or seek any documents from the two journalists, according to
The New York Times
, which cited government officials and a Dow Jones spokesperson. The agency might seek information in the future, however, the spokesperson was quoted as saying.
The subpoena is related to an agency investigation of allegations by Overstock that research firm Gradient Analytics and hedge fund Rocker Partners conspired to sink its share price. In a lawsuit last summer, Overstock accused both parties, and others, of such a plan. Rocker Partners owns slightly less than 5% of
the owner of this Web site.
In recent high-profile cases, journalists have come under pressure from other government entities to divulge sources and information. But the SEC has rarely issued subpoenas to reporters,
The New York Times
In a MarketWatch column Friday afternoon, Greenberg wrote that the subpoena sought unpublished communications, including emails and phone records, between him and people he has quoted. He said the SEC sought the information in reference to five companies.
"Never mind that I have never written about one of those companies," Greenberg wrote. And never mind that the other four (yes, including Overstock) deserved every word I wrote -- and then some ... I don't plan to be bullied into changing the way I do anything."
The campaign against Gradient and short-sellers by Overstock CEO Patrick Byrne has taken some bizarre turns. In a conference call last August, the executive said the conspiracy against his company was being orchestrated by an unnamed mastermind he called the "Sith Lord," in a reference to a character from the
movies. In the same call, Byrne also said some in Washington had tried to connect him to Al Qaeda.
The embattled CEO has plenty of problems inside his own company, however. Earlier this month, Overstock.com reported 2005 earnings that fell far short of Wall Street expectations. Byrne blamed internal systems problems, saying they would take two or three quarters to fix. He also said the company's growth would slow in 2006.