Overstock.com CEO Patrick Byrne's Drop-Dead Date: December 13

| About: Overstock.com, Inc. (OSTK)

Patrick Byrne is not going to have a very merry Christmas. The Overstock.com (NASDAQ:OSTK) CEO has twelve more days to reflect upon his big mouth.

The judge hearing a libel suit against him has postponed a hearing on a motion to hold him in contempt of court from Dec. 1 to Dec. 13. So Byrne gets a stay of execution for his astoundingly self-defeating comments on a message board, in which he blatantly violated a court order to STFU about the man suing him, Vancouver stock promoter Altaf Nazerali.

Byrne's contempt motion had been scheduled for last Thursday, and was put ahead another twelve days for reasons I haven't been able to ascertain.

Byrne is in hot water -- extremely hot water, as Canada is not a good place to be sued for libel -- for wacky comments made against Nazerali in his Deep Capture conspiracy-theory website, The suit that has already shut down the website, and the injunction that removed that stench from the internet also prohibited Byrne from making further comments about Nazerali on the web.

All those court orders, including the gag order that Byrne violated, had been scheduled to expire on Dec. 2 and have been continued until the Dec. 13 hearing.

Ordinarily, libel defendants are cautioned by their lawyers not to spout off about people suing them, and for their own good. Doing so can be used against them as evidence of malice. But Byrne just couldn't help himself, and thumbed his nose against both Nazerali and the court.

No, the man just can't control himself when it comes to making up stuff. The SEC is investigating if he used the same kind of tactic with his financial statements. Byrne has counteracted with a PR offensive in which he's tried to co-opt the Occupy Wall Street movement. What a darling!

To briefly recapitulate:

Byrne, through his hired goon Mark Mitchell, had labeled Nazerali as a kind of criminal mastermind, grossly exaggerating (and fabricating), turning Nazerali into a kind of Canadian Sith Lord. The sheer looniness of these accusations was such that the British Columbia Supreme Court took the unusual step of effectively shutting down Deep Capture and even ordering Google to exclude DC from its search results.

The judge's original ruling, issued on Oct. 19, has appeared on the web, and it gives you an idea of the kind of peril Byrne is in -- which is why I've predicted that he is going to work very hard to get this case thrown out of court.

The ruling refers to a creepy exchange of correspondence between Mitchell and Nazerali, in which Mitchell offered to take Nazerali off the Deep Capture site in return for becoming a "source" for further fantasies.

Since word of this first emerged, several people have pointed out to me how damaging his correspondence is for Mitchell, unless Byrne succeeds in his probable quest to avoid answering to the Canadian courts for his lies. Even if he gets it tossed, Mitchell is exposed as a fabulist and con man of the first order.

Remember that Mitchell stated in his "articles" that Nazerali was linked "to attempts to sell enriched uranium to Al-Qaeda, to Russian intelligence operators and arms dealers, to the godfather of the Kremlin, various mafia organizations in Italy and 'an impressive number of securities traders who are also narco-traffickers'". (This is a quote from the court's ruling.)

He offered to remove all of the above from the net. If Nazerali is really such a scoundrel, how could Mitchell possibly have offered to remove references to that dastardly man from the website?

Of course, if he just made it all up, it wouldn't matter.

In ruling against Mitchell, the judge pointed to another damaging admission Mitchell made in an email to Nazerali. Nazerali told Mitchell that he had never been to some of the places mentioned in the article. Mitchell responded:

Please note, though, that I mentioned in the story that the descriptions of the meetings were composites of multiple meetings with true locations disguised to hide the identity of sources. So whether you travel to those places is not necessarily important. [Emphasis added]

My goal, when I first set out to write the story was not to make problems for you. I simply found your life story to be fascinating and tried to learn more. My research led me down the path that resulted in the story that you read on the Internet. I do think the facts are right, but again, I am open to making changes or deletions if it results in a better story that is true.[Emphasis added]

Note the admission of outright fabrications, and a promise to make "changes or deletions" -- not if he's wrong, but "if it results in a better story that is true."! I doubt that Mitchell would know something was "true" if he ate it with ice cream.

The judge called this "interesting." Damn right it is.

This is really one-of-a-kind stupidity and recklessness. I've seen libel suits of all kinds, including one that was lodged against another conspiracy-theory website. I've never seen a libel defendants make such damming admissions -- in writing! Hell, this isn't an email. I think the word "noose" describes it more accurately.

The judge went on to grant the unusual step, even for pro-plaintiff Canada, of granting a pretrial injunction shutting the website, without advance notice to the defendant, saying that he was "satisfied on the evidence before me, particularly given the attitude demonstrated by Mr. Mitchell in his communications with Mr. Nazerali."

Way to go, Mark Mitchell.

It's always fascinating to see a career self-destruct. I'm not sure that Mitchell ever had much of one prior to his going to work for Patrick Byrne, but to the extent he ever did, it's over.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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