More Selective Disclosure From Overstock

What would be serious business for most U.S. public companies is routine, even humdrum at the corporate train wreck Overstock.com. Thus comes word today that Overstock committed a serious violation of SEC Rule 10b-5.

 Reformed felon and corporate crime expert Sam Antar has the scoop in a blog post today.

On Feb. 12, Overstock issued a press release celebrating a minor turn of the screw in its junk lawsuit against Gradient Analytics, an independent research firm that dared to sue the company.

But Overstock "forgot" to mention that Gradient was countersuing.

That's what's known as "selective disclosure," a violation of SEC Rule 10b-5. Can't just release news favorable to you. Kind of obvious, you might think, but this is Overstock.

According to the SEC:

Section 10(b) of the Exchange Act and Rule 10b-5 proscribe, among other things, misstatements of material fact made in connection with the purchase or sale of securities. Information is material if there is a substantial likelihood that its disclosure would be viewed by a reasonable investor as having significantly altered the total mix of information available.

Right. Such as disclosing the latest news in your fave junk lawsuit and keeping out the stuff that don't look so good.

To make things worse, it seems that the market reacted favorably to the news, which it wouldn't have done if the Gradient cross complaint was disclosed.

I wonder if the SEC will react quite so favorably?