Patrick Byrne Fails to Celebrate New SEC Investigation of Overstock.com
Vindication for Sam Antar, whom Overstock has tried to silence
Overstock.com CEO Patrick Byrne famously issued a thumb-your-nose press release to the SEC in 2006, when the company's records were subpoenaed in an SEC investigation of its accounting. Byrne said he "celebrated" the subpoena and he had every right to do so: the inert Bush administration SEC chairman, Chris Cox, was in the process of raping the SEC enforcement division, as a prelude to its inept performance on Madoff and the financial crisis.
Byrne had every reason to believe that nothing would come of it, and he was right.
Today, Byrne seemed downright peeved in reaction to yet another SEC subpoena, and a new SEC investigation of the company's smoke-and-mirrors accounting. In a press release issued after the market close, Overstock disclosed:
. . . it has received a notice dated September 15, 2009 from the Securities and Exchange Commission stating that the Commission is conducting an investigation concerning Overstock's previously-announced restatements of its financial statements in 2006 and 2008 and other matters. The subpoena accompanying the notice covers documents related to the restatements and also to Overstock's billings to its partners in the fourth quarter of 2008 and related collections, and Overstock's accounting for and implementation of software relating to its accounting for customer refunds and credits, including offsets to partners, and related matters.Byrne's reaction was pained: "All of the matters that are the subject of the subpoena have been thoroughly disclosed and we are disappointed, given the extensive public disclosures Overstock has previously made, that the SEC, given all of the challenges it faces, has apparently chosen to expend time and resources on another investigation of Overstock," said Overstock.com Chairman and CEO Patrick Byrne.
No "yipikaye" today.
Byrne goes on to stoutly declare that he "will continue to speak out as I have on the shortcomings of our financial regulatory system." Such as its failure to go after CEOs who manipulate their financial statements, like him?
What makes this latest SEC probe especially painful for Byrne is that this is a total vindication for white collar crime-fighter Sam Antar, who has repeatedly pointed out the shortcomings in Overstock's financials, particularly concerning its restatements.
I've said several times that Sam has given the SEC a "roadmap" of the dreadful accounting at this corporate crime petri dish. Apparently the agency is finally using it.
Now, the question is, does Byrne have reason for optimism this time? Will his political clout work again? Will his family's domination of the purse strings of the Utah Republican Party pay dividends again, and will the SEC's supposedly reinvigorated enforcement division do what it did last time--and take a dive?
Some other things I'll be curious to know:
Will the air-heads who lob softball questions at Byrne in cable and Internet interviews dare to ask him about any of this, or will they continue to ask him on how to run a terrific (if insolvent) internet retailer?
Will Byrne sic his paid hood, the nauseating Judd Bagley, to stalk Antar again when he gives a radio interview on another subject?
The only thing that disappoints me is that the SEC probe doesn't appear to encompass Overstock's vicious campaign of issuer retaliation. But then again, it might be, just not mentioned in the subpoena. (It's not as if victims have been uncooperative, after all.)
UPDATE: Just to clarify something I didn't make very clear, and which wouldn't be obvious if you don't wade through Sam's posts: why are the restatements important? Because they were done in such a way as to turn a loss into a profit. That's a material misstatement, folks.
Sam described the book-cooking process in detail in a this post.
All this "restatement" and "cooke jar reserve" stuff sounds complex, but it really boils down to something simple: Overstock is losing money, and is pretending to be making money. The word for this is "stock fraud."
Byrne is too rich to draw a salary at Overstock, so it is something of a rich-kid hobby for him, but he still has to obey the law.
I hope that if the SEC decides to actually enforce the law against Overstock, for a change, that it take another step that has rarely taken: referring this to federal prosecutors.
© 2009 Gary Weiss. All rights reserved.