Feb. 21 (Bloomberg) — Googlers got a little surprise last week if they went trolling for information about author Gary Weiss, a former Business Week magazine reporter well regarded for exposing bad guys in business.

Two ads popped up directing readers to antisocialmedia.net, a Web site that says Weiss is a bad guy himself. It is part of a campaign that includes  Overstock.com Inc. and its director of social media, Judd Bagley, a self-proclaimed user of “guerrilla” business strategies who says he runs the page independent of his employer. Weiss calls the page “a compendium of malicious lies.”

Overstock, an Internet discount retailer, has been the ultimate boom-to-bust stock. From a  highof $76.05 on Dec. 6, 2004, it now trades for about $19. Bagley and his boss, Chief Executive Officer Patrick Byrne, say the decline largely resulted from illegal trading by so-called naked short-sellers. Critics of Overstock say the price plunge is simple to explain: the company doesn’t make money.

The recent Google attack on Weiss is but the latest example of the public relations path Overstock and Bagley have taken to wage their bizarre battle against naked shorts.

Short sellers borrow shares and then sell them, expecting to buy them back for less if the price falls. Naked shorts skip the step of borrowing the shares first, something easily done in the age of electronic trading, when paper certificates are an endangered species.

Gradient Probe

To make the point that naked shorts are behind the stock’s decline, Overstock and its supporters use lawsuits, smear tactics and appeals to securities regulators. Last week, Overstock lost a round on the regulatory front, when the Securities and Exchange Commission ended a probe of Gradient Analytics Inc., an investment research firm in Scottsdale, Arizona. Overstock had sued Gradient, alleging stock manipulation.

Overstock CEO Byrne had described Gradient in a press release as a nefarious link in a chain that included hedge funds and journalists. No slave to subtlety, Byrne appeared on CNBC last February and called Marketwatch.com columnist Herb Greenberg “a crooked reporter” who was in cahoots with Gradient.

Greenberg doesn’t have much nice to say about Byrne, either. “This guy has gone way over the line,” he said in an interview. “I don’t think he knows the difference between fact and fiction.”

Overstock might be right or wrong about the impact and culpability of naked short sellers. Right or wrong, though, there is a separate question about the goings-on at the Salt Lake City- based company. Is this what the CEO of a publicly traded company should be doing when the financial results are the subject of chat-page jokes?

Quoting Shakespeare

In an e-mail reply to my questions, Byrne said that he was simply exposing wrongdoers, which include the malefactors who collude to destroy his stock. I would happily map out Byrne’s exact words, but he wouldn’t agree to an interview unless I only quoted full sentences from his e-mails. Brevity isn’t his style.

But belligerence is. On Feb. 2, the day that Overstock announced it had sued 10 major brokerage firms for their alleged roles in naked short-selling, Byrne quoted from Shakespeare’s Julius Caesar when a reporter from the Salt Lake City Tribune called for a comment. “`Cry havoc!’ and let slip the dogs of war,” he said.

Nobody would argue with Byrne that he’s a pro at creating havoc. He isn’t so good at creating profits. Three days later, Overstock  announced a $41 million net loss for the fourth quarter of 2006 and a $97 million loss for the year.

Ben Silverman, an investment analyst at Indie Research LLC who pens the public relations newsletter PR Fuel, says nothing positive has come to Overstock as a result of the CEO’s campaign. “Everything they’ve done over the past two years has had an extremely negative impact on shareholders,” he says. “It’s rare to see someone do so much damage to corporate credibility with public relations and investor relations.”

Winning Technique

Other public relations types are more supportive.

“You’re going to see much more of this — aggressively taking on the media and institutions like brokerage houses,” said James E. Lukaszewski, who runs a public relations firm in White Plains, New York, and is a fan of Byrne’s approach.

But when asked if companies that employ these techniques come out winners, Lukaszewski hedged: “The jury is out on that.”

Kathleen Fearn-Banks, author of “Crisis Communications: A Casebook Approach,” says the classic way to fight a corporate battle is “to promote the good things that you’re doing rather than fight what’s wrong with everybody else.” If a company is the real thing, she says, it will become clear that its detractors are wrong.

Displaced Dysfunction

Clients who are flailing, though, will often point to others to distract from their own problems, says Stanley Arkin, a New York lawyer who often represents executives on the hot seat. “It’s very easy to displace your own dysfunction by attributing it to other sources,” he says.

Byrne isn’t about to give up. On Jan. 13, he posted an e- mail on the Investorvillage.com Web site, warning that “the largest blows to Gary” Weiss, who frequently writes about Overstock’s problems, were still to come. “You ain’t seen nothing,” Byrne wrote.

That’s for sure, Weiss says. “The boundaries of his future smears are as limitless as his ability to fabricate and fantasize.”

Those efforts to discredit journalists are effective “with the tinfoil-hat crowd,” Silverman says. But the conspiracy theories about journalists carrying water for illicit traders are wearing thin, he adds.

“Any reasonable person would look at the operational results and feel a drop in stock price is warranted,” he said.

The correspondence with Byrne is posted at http://forums.auctions.overstock.com/patrick.php?#213839

(Susan Antilla is a columnist for Bloomberg News. The opinions expressed are her own.)

To contact the writer of this column: Susan Antilla in New York at  santilla@bloomberg.net.

To contact the editor responsible for this column: James Greiff at  jgreiff@bloomberg.net