Author of AYN RAND NATION (St. Martin's Press)
Follow on Twitter: @gary_weiss
Friday, November 19, 2010
Salt Lake Tribune is Hot on the Story -- Two Years Late
Several times in this blog I've described how the Salt Lake Tribune and Deseret News, the two statewide newspapers in Utah, have failed miserably at covering the corporate crime petri dish in their midst, Overstock.com. Today we have the latest example.
A day after the rest of the media, the Trib today finally got around to covering the lawsuit by seven California counties accusing Overstock of defrauding its customers by using phony price comparisons and inflated list prices. For a discount retailer this is about as serious an accusation as possible, for it means that you're not really a discounter after all--that your prices are, in this case, as phony as your accounting.
The Trib article, a regurgitation of AP copy from yesterday, begins, "Utah’s Overstock.com Inc. is under fire from district attorneys in seven northern California counties who claim the online discount retailer regularly made false and misleading claims about the deals it offered consumers."
In fact, Overstock has been "under fire" from seven northern California counties for the past two and a half years, and this is the first time the Trib has deigned to inform its readers of that fact. The Deseret News never has nor, to my knowledge, any other Utah paper.
As I described in a blog post at the time, Overstock disclosed the probe by California authorities in April 2008, in an SEC filing and accompanying press release.
The Trib ignored the story back then, and I trust it would have ignored the story now if the non-Utah media wasn't all over this story.
At the Deseret News, the only coverage given to Overstock.com lately was this article mentioning in passing Overstock's support of a union-busting measure.
Not to worry, Overstock, the Deseret News and the rest of the Utah media have got your back.
I haven't updated this blog much lately because of the press of other (i.e., paying) business, so I was pleased to find this blog listed with nineteen others by Rasmussen College in a list of "20 Blogs Accounting Students Will Love."
The very kind and appreciated kudo can be found here. Tracy Coenen's blog was also listed. I was a bit surprised that other, far worthier (than mine) and busier accounting blogs weren't listed (Going Concern, Jr. Deputy Accountant, Sam Antar's), but what the hell.
In my Street.com column a couple of weeks ago I described one of the ways companies conceal bad news -- by burying it in the "risk factors" section of their SEC disclosures. I cited as an example my favorite corporate crime petri dish, Overstock.com. For the past two years, Overstock has buried news that its pricing practices were under investigation by California criminal authorities.
Yesterday, the district attorneys of now seven California counties sued Overstock for $15 million, claiming fraudulent pricing practices. The counties had offered to settle with Overstock for as little as $7.5 million, but Overstock refused. No wonder: if the company had coughed up such a substantial amount of cash, it probably would have been driven into bankruptcy.
The allegations in California allege one of the oldest consumer scams in the books:
"Beginning no later than January 1, 2006, Overstock routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products," the civil complaint states. "Overstock used various misleading measures to inflate the comparative prices, and thus artificially increase the discounts it claimed to be offering consumers."
The company's general counsel "denied the allegations in the complaint and said the district attorneys failed to understand how Overstock advertised its prices." No, actually it seems to me that the DAs understood how Overstock advertised its prices.
In 2007, Mark Ecenbarger bought a patio set for $449 on Overstock. The website claimed the list price other companies were charging for the set was $999.99.
But when the furniture was delivered, there was a Walmart sticker on the side of the box showing the set was really worth $247.
The reaction of the market to this news, which emerged after the markets closed last night, is intriguing. The stock is actually up substantially. The reason for that is simple: fraud is already incorporated into the share price. This company is under SEC investigation for systematically cooking its books. Why should consumers be treated any differently than shareholders?
Overstock is pretty shameless in its fraudulent pricing. As noted in the lawsuit, BusinessWeek surveyed its pricing practices back in 2004 and found that it systematically overstated "list" prices. For example,"of the 92 Toshiba and Panasonic products available Mar. 2, 40 had list prices higher than the manufacturers' list."
Just for the heck of it I checked out Overstock's price for the paperback edition of Andrew Sorkin's Too Big to Fail. The price at Overstock is $11.06 and the search page for the book fraudulently says "compare at $20.55" and "you save 46%."
Baloney. The biggest online retailer, Amazon, lists the book at $9.90 and gives the list price as $18.00, not "$20.55." Barnes & Noble also prices the book at $9.90, and gives the correct list price.
So where did Overstock conjure up that "compare at" price? The Future Felons of America outlet shop in Salt Lake City? Misstating an easily determined (you look at the book cover or website) publisher's list price takes a degree of unmitigated gall, and contempt for the law, found only at Overstock.com.
Seems that Overstock has as much contempt for its customers as it does for its long-suffering shareholders.
UPDATE: Predictably, the two statewide Utah newspapers, the Salt Lake Tribune and Deseret News, always happy to run trivia like this, published not a word on the lawsuits.
But numerous other media outlets have picked up on the story including an ABC affiliate in California. Hey, you can't buy publicity like that, especially at the beginning of the holiday season.
New developments today in the continuing saga of Overstock.com, my favorite corporate crime petri dish. Word has slithered out of Utah that the nauseating corporate shill Judd Bagley (left), CEO Patrick Byrne's personal dirty tricks specialist and manager of Byrne's Facebook stalking campaign, has been transferred from Byrne's "Deep Capture" blog back to the corporate payroll.
As usually happens when Overstock wants people not to notice something, there was no public word of Bagley's transfer to the corporate trough. Word of that emerged from Bagley's LinkedIn profile, which indicates that he became "manager of collaborative systems" at Overstock in September. That was noticed by one member of the army of Byrne fans that keep tabs on his nutty escapades.
Bagley originally was on the corporate payroll as a p.r. spokesman before he was transferred over to DC in 2008, and now he's back.
There has been no activity on Byrne's Deep Capture site since a Bagley post in July, except for an incoherent post by Byrne in October.
It's not clear why the plug was pulled in this fashion. Was it the ongoing SEC investigation? Intervention by Byrne's dad, who is now serving on the board? Or was Byrne just bored with the whole thing and moved on to another plaything? Hard to say.
Whatever the reason, I'm sure that the shareholders of Overstock can rejoice at the addition of a slug of lead weight added to the company's payroll, and of course, the rank-and-file employees of the company can celebrate that they're working hard while Byrne puts a lackey on the payroll. Not sure was a "collaborative system" is, but my guess would be that it has something to do about spying on loose-lipped employees.
Byrne's PR effort nowadays are desultory appearances on Fox Business News, and otherwise the "jihad" against the naked shorting bogeyman has gone down the tubes. Every official and unofficial study of the 2008 financial crisis has found his obsession was not a factor in the crisis, and most haven't even mentioned it.
Mark Mitchell, Deep Capture
Interestingly, Utah corporate records show that Bagley remains "manager" and "registered agent" of Deep Capture LLC, with Byrne toady Evren Karpak still listed as "manager." It's not known if this means anything, or if it's just another sign of Overstock's casual attitude toward telling the government stuff.
The fate of Mark Mitchell, the fired former Columbia Journalism Review editor and Byrne's chief conspiracy theoretician, is unknown.
The biggest mystery of Byrne's corporate p.r. site remains unsolved: why did it take three people to manage a website that publishes rarely and serves mainly to salve the limitless ego of a bored CEO?
I'm a journalist and author. My latest book is AYN RAND NATION: The Hidden Struggle for America's Soul (St. Martin's Press: Feb. 28, 2012). My previous books were Wall Street Versus America (Portfolio: 2006) and Born to Steal (Warner Books: 2003). I was an investigative reporter and Wall Street writer for BusinessWeek, a contributing editor at Condé Nast Portfolio, and have written for the Daily Beast, Parade magazine, Salon, The Street.com, Fortune.com, Barron's and many other publications. I was an adjunct professor at Columbia University's School of Journalism. Follow me on Twitter @gary_weiss
Here are some early accolades for AYN RAND NATION:
"A scrupulous and sobering investigation, vital for our times." -- Kirkus Reviews
A "riveting and disturbing inquiry into Ayn Rand’s widespread influence on American economics and politics." -- Publishers Weekly
"Think Ayn Rand is marginal? Think again! Gary Weiss's powerful new history inscribes the libertarian firebrand at the very center of the American story of the past three decades." -- David Frum, New York Times bestselling author of The Right Man and Comeback
"A fascinating exploration of one of the fastest growing and most powerful coalitions in the modern conservative movement. With an unerring eye for detail, Gary Weiss embarks on a journey of discovery that examines the emerging influence of the Tea Party and other political groups that proclaim themselves to be the intellectual progeny of Rand, a crotchety, stubborn and proud purveyor of a philosophy of selfishness. Weiss explores this emerging cultural phenomenon with the even-handed and objective techniques of a sociologist. . . If you want to understand the men and women whose vehement voices are reshaping American government, you must read this book.” -- Kurt Eichenwald, New York Times bestselling author of The Informant and Conspiracy of Fools
"The timing of this book couldn’t be better for Americans who are trying to understand where in the hell the far-out right's anti-worker, anti-egalitarian extremism is coming from. AYN RAND NATION introduces us to the Godmother of such tea party craziness as destroying Social Security and elimination Wall Street regulation. Weiss writes with perception and wit."--Jim Hightower, best selling author, newspaper and radio commentator and editor of the Hightower Lowdown
"Gary Weiss brings his skeptical bent and sharp writing to a character who has inspired both fanatical belief and deep derision for decades: Ayn Rand. The book is a compelling journey of discovery about a woman who continues to exert a powerful hold over our society. Weiss shows how Rand is ultimately quite a bit more complicated than either her fans or her detractors would have it."--Bethany McLean, New York Times bestselling author of The Smartest Guys in the Room and All the Devils are Here.
AYN RAND NATION will be published by St. Martin's Press on February 28, 2012. Click here to pre-order the book from Amazon.com, and here
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I do, and on a variety of subjects, especially Wall Street's war with America and Ayn Rand's influence on the national political discourse.
I can tailor my presentation for each specific audience, and speak on a wide variety of subjects -- ranging from investment fraud to the perils of poor media relations.
A full listing of topics can be found at the Macmillan Speakers bureau, which can be contacted to make arrangements for my appearance. Or, if you prefer, drop me a line at garyweiss dot email at gmail.com.
Below are some of my articles and columns over the past few years. My most recent Street.com columns can be found here.
I write a regular weekly column for TheStreet.com. It ordinarily appears on Tuesdays. An archive of columns can be found here.
I wrote a blog and then a column for Portfolio.com in 2009 and 2010. An archive of the columns can be found here.
My Forbes.com column, Muckraker, ran from 2006 through early 2008. In a press release announcing the column, Forbes.com managing editor Paul Maidment said, "Gary is among an elite group of journalists whose zest for investigative journalism has brought real change to the subjects he’s covered."
"One of the best business books of 2006." -- The Miami Herald