During a widely disseminated conference call last month, Byrne named a range of perceived detractors in a rambling presentation he dubbed "The Miscreant's Ball." Among the media outlets he criticized was The Wall Street Journal. Byrne alleged a plan "to destroy our stock" and pass control of Overstock to an unnamed "bottom feeder." Overseeing this effort, he added, was "the Sith Lord or mastermind" — a reference to an evil, shadowy figure in the "Star Wars" movies — whom he also declined to name but described as a famous figure and "one of the master criminals from the 1980s."

The conference call had been held in connection with Overstock filing a lawsuit in a Marin County, Calif., state court against several individuals and entities that the company alleges are part of the effort to drive down Overstock shares. The two lead defendants are Gradient, a stock-research firm based in Scottsdale, Ariz., that has published critical reports on Overstock, and Rocker Partners, based in New York. The suit contends that while Gradient claims to do "independent" research, it is really a "shill" for Rocker, which manipulated the firm's Overstock reports to be "simply platforms . . . to pursue its investment agenda."

Gradient and Rocker have denied any wrongdoing in connection with Overstock. In a news release following the suit's filing, Rocker said that it and two fund partners named in the suit, Rocker and Marc Cohodes, plan to bring counterclaims against Byrne and others for their "smear campaign."

The latest development: The former Gradient employees have supplied sworn declarations to Overstock attorneys backing up Byrne's assertions about Gradient research. Copies of those declarations, which haven't yet been filed in the court case, have been reviewed by The Wall Street Journal.

Gradient was formed in 1996 as Camelback Research Alliance. It provides research on particular stocks to clients, mostly mutual funds and hedge funds. The firm's Web site describes Gradient as "uncompromising in its approach to independent financial research."

In his declaration, former Gradient customer representa- tive Demetrios Anifantis said he was involved in phone calls in which top Rocker officials asked Gradient to include "more negative information" in Overstock reports and to "downplay any positive facts." Anifantis further contended that Gradient would modify reports to meet Rocker's requests and that Rocker on occasion asked that a report be held for a period of time so that it could make a trade in the stock.

The two other declarations — by Robert Ballash and Daryl Smith, both former sales representatives — make similar allegations about the ability of Gradient's clients to influence the firm's stock research, though they for the most part don't mention Rocker or any specific fund.

Anifantis and Ballash also say they had concerns involving the connection of senior Gradient officials to what one declaration described as a "hedge-fund adviser." A conflict could arise if that entity had been investing money in stocks Gradient was covering, Anifantis said.