A Hagstrom For Regulators

I believe I've used the expression "road map for regulators" more than once to describe ex-scamster Sam Antar's detailed analysis of Overstock.com's sleazy accounting practices.

So here's a different metaphor: The detailed post out today is very much in the tradition of the venerable map-maker, Hagstrom. Except that the only motorists who need follow it are investigators for the SEC.

The title says it all: "Overstock.com and Patrick Byrne: Phony Accounting and False and Misleading Disclosures." You can read it here.

I really don't have much to say beyond "read it." If, that is, you are interested in how a widely publicized company can manipulate its financial statements, right in plain view of an army of feckless brokerage house analysts and the world media.

Byrne has lately been posting on the Overstock website a warmed-over attack on former Business Week reporter Tim Mullaney, who posed a series of tough questions to Byrne two years ago. Byrne has been practically begging the media to pick up on his smears. Anything to divert attention from his shady accounting. I guess he feels that in glorying in his past victories -- he browbeat Business Week into not writing about his dreary financial results -- he can relive them.

The irony is that Mullaney's questions were right on the mark, and Byrne's replies were slippery and deceptive. Byrne also said in the exchange with Mullaney that "I think 'EBITDA' is the stupidest thing I ever heard emanate from Wall Street (no small feat)." Yet he recently trumpeted -- and inflated -- the company's EBITDA numbers.

Byrne's view of his face-off with Mullaney as a public relations triumph borders on the delusional. It established his reputation in the media as a bully and as a CEO with something to hide.

I doubt that the SEC, which is investigating Overstock and Byrne, is focusing massive resources on his "campaign of menace" (as Joe Nocera put it) against critics. Their case largely centers on accounting. Silencing critics is, I believe, largely secondary, sort of icing on the cake.

Now they have no excuses for further dilly-dallying, as the accounting issues that are evident in public statements ( Lord knows what is buried in their books and computer files) has now been laid out for them.

They've got a great road map. Time to step on the gas.

© 2007 Gary Weiss. All rights reserved.