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In our latest installment of the news from Overstock.com's (NASDAQ:OSTK) myriad lawsuits, we have new chapters worthy of a Perils of Pauline episode from the silent movie days. Overstock lost a hotly contested effort to withhold information from California prosecutors in a consumer fraud suit, and a devastating revelation emerged in a libel suit against Overstock's mercurial CEO Patrick Byrne.

In the fraud suit, which was brought by criminal authorities from throughout California, Overstock had been fighting tooth and nail against efforts by the district attorneys to probe its pricing practices.

The California criminal authorities charge that Overstock set false comparison prices, thereby misleading customers of the website about discounts that weren't really discounts at all. If Overstock's "low prices" aren't really low, the company isn't acting very nice to consumers, is it?

The information that was sought by the prosecutors was fairly routine: data on Overstock's "methodology" for determining comparable prices. The judge hearing the case indicated in November that he was likely to rule against the company. In a ruling handed down on Tuesday, he made it official. I've uploaded a copy of the judge's decision here.

What this means is that Overstock is going to have to fork over all kinds of information that it obviously wanted to keep from the California prosecutors. Damned if I know why. Maybe because it didn't make the company look very good?

Anyway, the prosecutors are seeking $15 million in their lawsuit, and they're one step closer toward either winning their case or extracting a generous settlement from the financially shaky Utah company.

The next item on today's litigation roundup pertains to that libel suit pending in Canada against Byrne, his smear site Deep Capture, and the ex-journalist, Mark Mitchell, who churned out fantasies on demand for the conspiracy theorist-CEO.

Seems that Mitchell made a fairly glaring boo-boo in the articles in which he contended that a Vancouver stock promoter, Altaf Nazerali, is some kind of Al Qaeda agent. This is really kind of amusing, though I doubt that Nazerali finds it very funny.

And Mitchell? Rest assured, he's not finding it funny at all. I have a funny feeling that a certain ex-journalist is having sleepless nights over in Evanston. (Having lived in Evanston, I can assure you that there's not much to do there if you're having a sleepless night.)

In his lengthy rambling, nutty smear job on Nazerali, Mitchell refers to Nazerali as "CEO of an outfit called the Aga Khan Foundation." He goes on to tie Nazerali, through the foundation -- a "massive business enterprise" -- to the "Pakistan-based Habib Bank."

Mitchell went on:

Habib Bank has been accused of laundering money for Al Qaeda and for Omar Sayed Sheikh, the Jaish-e-Mohammed operative and suspected agent of the Pakistani spy services who handed Wall Street Journal reporter Daniel Pearl to 9-11 mastermind Khalid Sheikh Mohammed, who then (according to Khalid Shiekh Mohammed) sliced off Pearl's head with a Yemeni knife.

Well, there you go. A direct tie between the mastermind of the 9/11 attacks and the plaintiff in this suit.

Even if everything Mitchell says about the Khan foundation etc. is the truth (and I wouldn't believe that dude if he told me that the sun shines in Arizona), there's a problem: He was talking about the wrong Aly Nazerali. Yep, Mark Mitchell made the kind of mistake that would flunk out a freshman in Journalism 101.

Nazerali alludes to the case of mistaken identity on a website he just set up, itcouldhappentoyou.org, in which he points out that "the sloppy journalism of the writer had resulted in a case of mistaken identity, confusing Mr. Nazerali with another person bearing a similar name."

I must confess that I didn't notice this when I first encountered Nazerali's website a few days ago. This mistaken-identity boo-boo was pointed out by a loyal reader.

A photo of that other Nazerali can be found on the website of the Aga Khan Foundation. If you examine closely this photo and its caption, you can see that the fellow in the center of the photo is not the Byrne-suing Nazerali whose photo appeared in this Canadian newspaper. Oopsie!

Funny how Byrne hasn't alluded to this massive error in his recent pronouncements on the libel suit. I guess maybe because he realizes that he's got a problem on his hands, one that goes to the heart of his boy's fantasy drivel on Nazerali -- and, by extension, to the humongous quantity of other lies spread like manure all over his website.

I'd go so far as to say that he is totally discredited by this massive screwup, which Mitchell could have avoided by taking elementary precautions. Well, I guess that explains why he's an "ex-journalist" and not still plying the journo's trade. Kind of sad, but there you have it.

I guess that might also explain why Byrne hasn't "re-syndicated" his smear job, as he threatened recently. But not to worry. A few days ago I pointed out that Byrne is far too much of a manly man to let the facts get in the way of his ego. Bears in this stock can take heart.

Expect a Hubris Attack any day now. I have every confidence that Byrne will be only too happy to demonstrate his cojones by simultaneously antagonizing the judge in Canada and proving once again that the truth means nothing to him. Not that we had any doubt about that.

Source: Overstock.com Litigation Roundup: Fraud Suit Setback, A Tale Of Two Nazeralis