Catapult Communications Corp. in Los Angeles quit their auditors, Deloitte & Touche. And they made public the reason.
Deloitte’s fee for 2008 audit = $985,000
Local firm fee for 2008 audit = $561,000 or less (a 43%+ savings)
The local firm is Stonefield Josephson, a 100 employee firm with 2007 revenues around $40 million. That fee level gets the firm ranked 67th nationally. The claim their fees are lower because they don’t have the same bureaucracy of Deloitte.
Am I surprised? Of course not. Audits are commodities. Auditors sell a clean audit opinion. Businesses, the buyers required to buy those opinions, know that auditors provide little actual value to the company. So why pay higher fees??? Especially when the difference is so big?
The biggest reason why many companies stick with the Big Four accounting firms is for the name. Do the clients really think a big name firm gives them something better? Probably not. But they know that when they’re presenting financial statements to investors and banks, the name lends credibility.
Catapult announced its decision and the huge savings, saying that they don’t believe that the quality of their audit will be affected. See? Commodity. Useful? Not really.
Today, Overstock.com (NASDAQ: OSTK) stock
hit closed at a low like it hasn’t seen in four years: $11.85. $11.30. Could it be that Patrick Byrne’s grand charade is finally unraveling, right before our very eyes?
For quite some time, there have been plenty of questions about the company’s accounting practices… specifically how it accounts for inventory. The financial statements and the things said in conference calls didn’t quite mesh. Executives talked about knowing at the beginning of 2006 that there were going to be huge write-offs of inventory, yet not disclosing that information until the end of 2006.
The market didn’t seem to care a whole lot. But finally, with the apparent shenanigans surrounding the resignation of president, COO, and board member Jason Lindsey, maybe the market is finally paying attention.
Do you suppose Patrick Byrne is panicking at the though of Overstock.com’s stock price going down into single digits? He should be. Might I suggest he run over to the Overstock warehouse and pick up a few of these in case of emergency?
In the January 2nd press release announcing Jason Lindsey’s departure from Overstock.com (NASDAQ: OSTK), Patrick Byrne said the following:
“Jason co-founded the company and helped build it before retiring the first time. When I screwed it up a couple years ago he came out of retirement and has played a decisive role getting it back on track,’” said Overstock chairman and chief executive officer Patrick Byrne.”
It’s interesting that Patrick admits to “screwing it up.” It’s even more interesting that when he apparently “screwed up” Overstock.com, the board of directors rewarded him with 25,000 shares of company stock.
According to Overstock’s 8-K filed on April 25, 2006:
On April 25, 2006 the Compensation Committee of the Board of Directors of Overstock.com, Inc. (the “Company”) approved additional grants under the Company’s Performance Share Plan, including grants of 25,000 performance shares to each of Patrick Byrne, who, effective April 25, 2006, was appointed Chairman and Chief Executive Officer, and to Jason Lindsey, who, effective April 25, 2006, was appointed President and Chief Operating Officer of the Company. Each of Dr. Byrne and Mr. Lindsey is also a member of the Board of Directors. The terms of the grants are substantially identical to those of the grants to other officers of the Company described in the Company’s Report on Form 8-K/A filed January 31, 2006.
The closing price of the stock on April 25, 2006 was $27.40, making this grant to Patrick Byrne worth about $685,000. Not a bad payday for “screwing up” the company. I wonder what his grant would have been if he had actually done well?
In light of a recent rise in fraud at ATMs, Citibank is lowering the daily cash withdrawal limit for some customers. The company says this only affects a small number of customers in New York City, but it’s still causing a flap. Citibank says they are investigating and working with police, but they’re not giving any other details.
In 2006, Citibank restricted ATM access for customers traveling in Canada and Russia. It was later revealed that ATM numbers and PIN numbers had been stolen, prompting this action.
Consumer advocates say this move by Citibank is unfair, yet I don’t know how they can really criticize the bank for trying to protect customers. If a customer’s bank account is stolen from because of this ATM problem, a customer could lose money that will take a while to replace. While a credit card customer isn’t liable for fraudulent charges on a credit card, when fraudulent charges occur through a debit card, the money is quickly gone and the customer may have to wait to have the money put back into their account. Certainly enacting some stricter limits on cash withdrawals for a period of time is preferable to the loss of money from a fraud?
You’d think that with the sudden resignation of Overstock.com’s (NASDAQ: OSTK) president, COO, co-founder, and board member Jason Lindsey, Patrick Byrne might be a little bit busy. After all, when high-level executives bail without warning from a sinking ship like Overstock, and there’s no replacement to be had, there tends to be a bit of work to be done.
And with the company’s stock in a serious free-fall, there should be even more scrambling going on at Overstock.
But Patrick Byrne, the CEO who has almost single-handedly run Overstock into the ground doesn’t want to spend his precious time trying to run the company. He’s too busy playing word games with a reporter and posting on message boards without disclosing his full name and affiliation with Overstock. Oh well… some things never change.
Here’s his latest on the Investor Village message board. Click on the graphic to see it full size.
Eugene Plotkin, former Goldman Sachs associate involved in insider trading was sentenced yesterday to almost five years in prison. The 28-year-old Harvard graduate got the minimum possible sentence under his plea agreement.
Plotkin was arrested in early 2006 for a huge insider trading scheme that involved one of his coworkers, David Pajcin. Also involved were a Merrill Lynch analyst and two employees of Wisconsin-based Quad/Graphics, Inc.
Plotkin and Pajcin recruited Nickolaus Shuster and Juan C. Renteria Jr. to get jobs at a Quad/Graphics printing plant that printed Business Week magazine. Their part in the scheme was to steal advance copies of the magazine so that Plotkin and Pajcin could hear about information from the IWS column before the information was available to the general public. The Goldman men trade on the information themselves, or passed the insider information to other traders invovled in the scheme.
The Merrill Lynch analyst, Stanislav Shpigelman, illegally gave Plotkin and Pajcin information on upcoming mergers, including Adidas and Reebok. In total, these two schemes netted about $6.5 million.
FDI: China Government Issues Official Interrogation Notice on Usana Health Sciences Inc. Associate for Alleged Multi Level Marketing Activities in Nanning, the Capital City of the Guangxi Province in Mainland China
FDI also releases several new Web sites that demonstrate that Usana Health Sciences Inc. (NASDAQ: USNA) is recruiting Chinese nationals for multi level marketing in down lines that are literally from Malaysia to Mexico. Continue reading
I bet Patrick Byrne, CEO of Overstock.com (NASDAQ: OSTK) wishes the week was over. He screams, “NOOOOOOO…. not one more day of trading!”
The stock fell over 12% to $13.24, the lowest price since 2003. But of course, the company isn’t sucking wind… so says Patrick Byrne. No, he says things are just rosy.
But we’re still looking at a company that has never turned a profit. That has consistent “unusual” inventory numbers, with reserves and junk inventory that have varying explanations. That just keeps eating up more and more cash. That is run by a loon who is more interested in developing and promoting conspiracy theories than he is in running the company.
Sell, and sell fast. We’ve been telling you all along that this is a sinking ship. The departure of Jason Lindsey, co-founder, president, COO, and member of the board of directors is a bad sign. They say he’s sticking around part-time, but that doesn’t hold water in light of his resignation from the board. How much more “part-time” can you be than to be on the board?
There are also some interesting comments and observations on this issue at:
Does it surprise you that the author of the piece in question is Eugene Kane of the Journal Sentinel? Of course not.
He laments for those who violate winter parking regulations. He admits parking illegally, but then cries that he’s a victim of the naughty towing companies who make money off towing.
Wanna bet that if the parking regulations weren’t enforced and the snow wasn’t being removed fast enough in spite of thousands of cars in the way, Eugene would find some victims of that debacle instead?
New Orleans, LA. Lisa Mayerhafer, a former administrator for the New Orleans law firm Gertler, Gertler, Vincent and Plotkin, was charged with stealing more than $200,000 in a bank fraud scheme over several years.
Background: According to federal court documents, Mayerhafer worked for the firm as an office administrator from 1997 to April 2007. Her job duties included paying the firm’s bills and making deposits into its bank accounts. Continue reading