The regular readers of this blog are familiar with the issues at Overstock.com. The company can’t turn a profit to save its life, but CEO Patrick Byrne blames that on short sellers. The fact is that the financial statements have some curious things in them, but Byrne never gets around to actually straightening out all the discrepancies.

This week Sam Antar offered Byrne an opportunity to do just that… explain discrepancies and answer questions.

You see, Patrick Byrne thought he was being cute during last week’s earnings call when he said:

Sam Antar, if you want to join us as an [inter-locketer], I have to stick around — I have to leave in 15 minutes but I’m hoping you’ll join, Sam.

This is none other than the Patrick Byrne who believes a Sith Lord is masterminding a conspiracy that is causing Overstock.com to be a horrible company. The same Patrick Byrne whose underlings threaten teenage bloggers. The same Patrick Byrne who is so interested in his job that he’s busy playing on the internet while he’s supposed to be paying attention to an earnings conference call for investors. The same Patrick Byrne who posts messages about Overstock.com on discussion boards without disclosing that he is the CEO of the company he’s hyping. The same Patrick Byrne whose financial statements hint to the possibility of earnings management.

Google search:

cpa firm fraud detection

Answer:

That’s exactly what I do via my company, Sequence Inc. Most of my work comes from attorneys, usually outside counsel. They contact me when a client has a situation in which they suspect fraud. Usually, there is a small bit of evidence that triggers an investigation, and I come in to do the full-blown examination and investigation.

When the investigation is complete, the smart companies have me stick around to help them prevent a similar fraud in the future. The information gathered during a fraud investigation can be extremely helpful in tightening controls across the board… hopefully leading to a decreased fraud risk in the future.

This information is old (from early June), but since I have so many people reaching my site with searches related to Flip This House, I thought I’d print it anyway.

I wrote previously about the lawsuit between A&E and Richard Davis of Trademark Properties here and here. Most of my information was derived from a website called Flip This Lawsuit. The owner of that site summarized a June 6 hearing on summary judgment motions made by A&E. Essentially, A&E said that no written contract existed between them and Davis/Trademark, and that the verbal contract wasn’t what Davis claims it is.

Important issues decided during this hearing, per Flip This Lawsuit:

TheStreet.com issued some upgrades and downgrades late last week, and had this to say about Usana Health Sciences:

Nutritional and personal care products developer USANA Health Sciences (USNA – Cramer’s Take – Stockpickr) has been upgraded to a buy from a hold. Its revenue increased by 16.9% in the third quarter compared with the same period last year. Earnings improved to 70 cents a share from 55 cents per share over the same timeframe.

The company’s return on equity improved to 184.53% in the third quarter compared with 78.97%, a signal of significant strength within the corporation. This return on equity greatly exceeds that of both the industry average and the S&P 500. USANA Health had been rated a hold since August 2007.

Somebody missed the boat when they said that the return on equity figure was a sign of “strength.”

Usana’s return on equity ratio has gotten so high because of the share buyback program. Usana has significantly reduced the shareholders equity figure on the balance sheet, so even if earnings remain at a constant level, the return on equity ratio will go up a lot.

And… they also failed to realize that at the same time shareholders equity is plummeting, the company’s debt level is skyrocketing. Not a sign of strength at all.

he trial of KPMG executives charged with creating and marketing illegal tax shelters has been delayed. 13 accused executives had all charges dropped after a judge recently ruled that it was illegal for the government to pressure KPMG to not pay the legal fees of the 13.In this latest twist, the trial is being delayed because of a claim that one of the defense lawyers has a conflict of interest. Judge Lewis Kaplan delayed the case (that was to begin on Tuesday) and removed Steven Bauer of Latham & Watkins, who was representing John Larson.

Larson did not waive his right to have an attorney without a conflict of interest. The alleged conflict came about because Bauer was the attorney for David Makov, formerly charged in the case. Makov is going to testify for the government in the case, so this may be a conflict in representing Larson.

Roddy Boyd at the New York Post has picked up the story about Usana illegally recruiting new associates in China.

Boyd explains China’s laws like this:

Mannatech Inc. fired its auditors, Grant Thornton, after refusing to comply with GT’s demand that Sam Caster be removed from all duties. Caster is the founder of Mannatech and the current chairman of the board. He resigned as CEO two months ago after Texas started legal proceedings against the company for making illegal health claims about their products.The Board says it didn’t remove Caster from his duties because it wasn’t “in the best interest of shareholders.” Mannatech’s SEC filing regarding the firing of the auditors said that there were no disagreements about accounting principles, audit scope, or financial disclosures.

The new auditors for Mannatech will be BDO Seidman.

I have been remiss in my duties…. I promised Timothy Sykes that I’d review his book, An American Hedge Fund on FRAUDfiles. And I still haven’t gotten around to it, thanks to an upcoming move of my office and a dozen other work-related things that have needed my urgent attention.

I promise to do a real review soon, but for now, this is it. I read the book a couple of months ago, and it was fantastic. Timothy basically took $12,000 from his bar mitzvah and turned it into over a milllion dollars in three years. He started his own hedge fund and had lots of ups and downs.

But people working within the hedge fund industry have many regulations about what they can say about the industry. So in order to really be able to talk freely about the industry, Timothy has closed his hedge fund and is now promoting his book.

My full review of the book soon…

When Usana lost auditors Grant Thornton, it filed an unreviewed 10-Q, prompting a delisting warning letter from NASDAQ. Following the hiring of PriceWaterhouseCoopers as the new auditors, Usana filed an amended 10-Q, which brought them back into compliance with SEC rules.

Yesterday, a NASDAQ panel determined that the company is compliant and in no current danger of delisting. In true Usana style, CFO Gil Guller added his own little spin to the NASDAQ decision:

“The Panel specifically recognized that USANA’s Audit Committee completed an investigation of the allegations made by third-party detractors, and that the Audit Committee found no merit to them.”

That was an excellent attempt at making it appear that NASDAQ says the allegations made by Fraud Discovery Institute and being investigated by the SEC are without merit. On the contrary, I think it really means that NASDAQ was informed that Usana’s audit committee has done their little “investigation.” That’s all.

I’m quite sure NASDAQ said nothing to the effect that they think the allegations have no merit. Nice try, Gil.

Google search:

should a limit be set on ceo pay

Answer:

No. The market will decide if CEOs are being paid too little or too much. I discussed this issue in detail in my article for the Wisconsin Law Journal, CEO Pay: Fraud, Excessive, or None of the Above?