The Little Profit That Wasn't There
With great fanfare, my favorite corporate fraud poster child, Overstock.com, reported the first quarterly earnings in a dog's age. Whoopee! The "earnings" were tiny, but the shares shot up -- only to fall again, when two analysts downgraded the stock, pointing out that the company had achieved the "profit" by one time events and that revenues were way down.
Now it seems that it had no profit at all. Fraud-fighter Sam Antar points out in his blog today that Overstock only was able to report "earnings" by violating accounting rules. Its "profit" (quote, unquote) should have actually been a loss of $800,000.
This is the first outright Overstock fraud to take place on the watch of the new chairman, Mary Schapiro. The ball is now in her court.
According to Statement of Financial Accounting Standards No. 154 and SEC Staff Accounting Bulletin No. 99, Overstock.com should have restated all prior accounting periods, rather than use a "one-time gain" to correct its accounting errors "relating to payments from partners who were under-billed earlier in the year."
As a result of violating SFAS No. 154 and SAB No. 99, Overstock.com improperly reported a Q4 2008 net profit of $1 million, instead of an $800,000 net loss.
Every time Antar has reported on Overstock's chicanery -- which he has done numerous times in the past -- he has been a target of a slimy smear campaign by Overstock CEO Patrick Byrne, and his vicious attack dog Judd Bagley. Byrne already engaged in a kind of preemptive strike, childishly attacking Antar during the conference call.
It's the kind of issuer retaliation and blatant Sarbanes-Oxley violations (failure to get a waiver from the corporate code of ethics) in which Byrne has engaged freely, without any interference from Chris Cox's SEC. It will be interesting to see what these two creeps will unleash on this guy, and it will be even more intereting to see if Mary Schapiro's SEC will let them get away with it -- and with Overstock's continued flouting of accounting rules.
UPDATE: Predictably, Byrne sicced a wacked-out former journalist named Mark Mitchell to attack Antar on the Deep Capture site. It is a comical rant that reads as if Mitchell was sucking an LSD cube while his sweaty hands flew over the keyboard, with cameos by Mike Milken and Bernie Madoff (a naked shorter, wouldn't you know). Screwy as it is, it's still issuer retaliation, no matter how many corporate shells Byrne may erect.
© 2009 Gary Weiss. All rights reserved.