Overstock.com Under Criminal Investigation on Ads
The fascinating corporate basket case Overstock.com, and its dipsy doodle CEO Patrick Byrne, have engaged in a flurry of activity in recent days. Byrne has been doing stuff that didn't seem quite rational -- like moving the antisocialmedia.net corporate smear site to the Overstock website.
Now we know why: Overstock is the target of yet another investigation, this one a grave criminal probe by not one but five counties in northern California. That's on top of the active probe of its accounting that has been slowly chugging away by the SEC for the past two years.
This calamitous news is buried in the Overstock first quarter
That's a material event, to say the least. Funny that Overstock didn't disclose it at the time, even while it was churning out a press release putting a spin on a libel suit filed recently against the company. How come that is a "material event" and not an investigation by five counties in California? Under Sarbanes Oxley, material events must be disclosed within 48 hours, and something this grave, I would think, would have to be disclosed even sooner. Nasdaq also mandates swift disclosure of piddling stuff like criminal investigations.
On April 15, 2008, we received a letter from the Office of the District Attorney of Marin County, California, stating that the District Attorneys of Marin and four other counties in California have begun an investigation into the way we advertise products for sale, together with an administrative subpoena seeking related information and documents. We follow industry advertising practices and we intend to respond fully to the subpoena and cooperate with the investigation.
As for the numbers in the press release.... stay tuned. The numbers were so hyped by Byrne in the earnings release that the stock took an enormous pop -- 35% at last look -- even though the company is still losing money at such a rate that it will be out of business before long. In the past, particularly when it comes to non-GAAP accounting measures, Overstock's numbers have proven dubious, to say the least.
UPDATE: Tracy Coenen weighs in on AOL Bloggingstocks.
© 2008 Gary Weiss. All rights reserved.