The Overstock.com Laugh-Fest Continues

When the SEC dropped its investigation of Overstock.com despite in-your-face evidence of improper conduct, I said that the SEC had demonstrated that it was useless in dealing with corporate misconduct.

Today we can see just how useless it has been, and as usual the company's latest SEC filing provides the answer. Ex-felon fraud fighter Sam Antar points out today that Overstock admits that its financials invite litigation and regulatory action.

Sam reports:

Overstock.com’s (NASDAQ: OSTK) new amended financial reports filed today, vindicates findings, first exposed in this blog, that the company violated Securities and Exchange Commission Regulation G governing non-GAAP disclosures, such as EBITDA and materially overstated its non-compliant EBITDA in financial reports dating back to Q2 2007. Even worse, Overstock.com disclosed in its 10-Q for Q3 2008, released today, that its restatement of financial reports dating back to 2003, due to accounting errors relating to revenues, customer refunds, and customer credits, may subject the company to future regulatory action from the Securities and Exchange Commission and litigation from shareholders seeking damages:

On October 24, 2008, we disclosed certain accounting errors and announced our intent to restate certain of our financial statements and other information to correct these errors (see Note 3 to the consolidated financial statements contained in Part I, Item 1 “Financial Statements (Unaudited) (Restated)”). As a result of these errors, we may become subject to litigation and regulatory action. Although we would vigorously defend against any such actions, there can be no assurance that we would prevail. An award of damages in such suit or a regulatory penalty imposed as a result of regulatory action could be substantial and harm our business. The financial costs and the dedication of the time of management to defend such actions could also harm us financially and disrupt our business. [boldface added]

Sam doesn't take a penny for his good work on this subject, which has made him one of the prime targets of the Overstock smear campaign against its critics.

Overstock is a textbook case of how a politically influential CEO has managed to avoid consequences for his actions. Let's see if the post-Cox SEC will roll over so easily in this and other cases.

© 2008 Gary Weiss. All rights reserved.