Monday, August 27, 2007

Patrick Byrne Goes Speechless Over Managed Earnings

Byrne is mum on his company's accounting practices CEO Patrick Byrne has arguably the biggest mouth in Corporate America. His online rantings are the stuff of legend, and he is only to happy to appear on stock-promotion websites to divert attention from his company's abysmal performance.

So that's why it's very significant to observe Byrne's conspicuous silence this weekend -- in response to serious questions that fraud-buster Sam Antar has posed concerning inventory accounting at Sam believes the numbers indicate Overstock may be engaged in what is known in corporate crimes circles as "earnings management."

Sam posed the questions in a devastating three-part series (the last one posted here) on his White Collar Fraud blog. In the series he systematically shredded the company's accounting for inventories, which according to Sam "point to possible manipulation of earnings."

Forensic accounting expert Tracy Coenen has a valuable analysis of the issues in her blog today. The title says it all: " cooking the books?"

Sam does not raise this issue lightly, and this dead-serious conclusion -- with all it implies in terms of civil and even criminal liability -- is supported by his detailed analysis of Overstock financial statements.

He emailed links to the series to Byrne, as well as to the SEC, the famously comotose board of directors (including its famously comatose new "independent" member, class action lawyer Joseph Tabacco), and to members of the media.

The purpose was to give Byrne an opportunity to defend himself. I think you'd agree that if Byrne had an explanation, he would provide one -- an opportunity to demolish his most vocal adversary!

Sam, who masterminded the Crazy Eddie stock swindle, is one of the country's leading experts on accounting fraud. He lectures regulators, accounting groups, government agencies and corporations throughout the country on how to detect and thwart accounting shenanigans. I have no doubt that Byrne takes him dead seriously.

So as you can expect, Byrne wrote back swiftly. But, surprisingly, there was no rapier-like shredding of Sam's logic from this self-styled "doctor of philosophy." None of the quotations from Buddhist theology or even a simple "you're wrong, Sam." Byrne instead provided a flip reference to a blunder Sam made on a stock message board. And that was it.

Byrne made sure to include the Overstock board and the SEC in his response, to ensure that the people supposedly responsible for overseeing his conduct -- and the federal agency that is investigating him -- are aware that he has no answer to Sam's questions.

This all happened on Thursday. Sam followed up on Friday, just to be sure that Byrne wanted contemptuous non-response to be his official reply, and his response was still more silence.

There is an old expression, "Silence is also an answer." We know what it means in this case. It means, "You've nailed me, Sam."

Although Byrne seems to have run out of lies for the moment, I see that his paid stalker, Director of Communications and spokesman Judd Bagley, continues to pull new baldfaced lies out of his limitless supply of fabrications. The latest was posted on's corporate smear site this weekend.

Bagley, as we all know, was hired to run It was one of the most widely ridiculed (see Wall Street Follies cartoon at right) actions of Byrne's tenure as CEO. Byrne's cover story is that Bagley was hired to run a pathetic wiki called OMuse. Byrne's obfuscations and lies about Bagley and the smear site have been tracked by Sam Antar and the O-Smear blog in the past, and I've written about them many times.

Over the weekend, Bagley posted the on the corporate smear site that the "big news" that I said he was"hired to run a wiki." Here's the item:

Only problem is that I had no blog item on Aug. 25, and have never said that. (See for yourself.) I have never adopted Byrne's utterly fatuous cover story for hiring Bagley, which falls apart on even the most cursory examination.

There is clearly an inventory management problem at Overstock. com. An inventory of sorely needed lies is being squandered on the no-readership corporate smear site, when they are required to excuse Overstock's accounting practices. A shameful waste of's most valuable corporate asset!

© 2007 Gary Weiss. All rights reserved.

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