Both civil and criminal cases often involve an element of proving or disproving income of an individual or business. It is not unusual for a divorce case to include allegations of hidden income or assets. In contract disputes alleging the loss of sales or profits, an accurate determination of income is critical.

In criminal cases, the issues surrounding the income of an individual or business have even higher stakes. These cases are quite often tax-related matters, but cases involving white collar crimes and drug trafficking usually include questions about income too.

UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

On Tuesday, Barry Minkow and the Fraud Discovery Institute issued a press release stating they were ending their investigation of Medifast Inc. (NYSE:MED) in order to focus on other companies.

One day later, Medifast filed a defamation suit in California against Minkow, FDI, Robert Fitzpatrick, William Lobdell, iBusiness Reporting, me, my company Sequence Inc., and an anonymous message board poster. The suit seeks general damages of $270 million, plus other damages.

Koss Corporation (NASDAQ:KOSS) filed a 10-Q with the Securities and Exchange Commission yesterday that pointed out the obvious… Now that their VP of Finance isn’t stealing at least $31 million from them, they think they’ll be more profitable.

The company says they’ll be restating the financial statements for the fiscal years ended June 2008 and June 2009, at the very least, and also restate the quarterly reports filed so far for fiscal 2010. The company says their numbers will improve now that Sue Sachdeva isn’t stealing from them (bold added by me):

UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

In mid-2009, Barry Minkow and Fraud Discovery Institute began investigating Medifast Inc. (NYSE:MED), and published several reports on the company and its business model. The company was compared to Your Travel Biz (YTB), a company that was under fire from the authorities for being an alleged pyramid scheme.

There were questions about Medifast’s auditors,  but most notably, the company was criticized for the fact that its financial growth was due almost completely to the recruitment of new “coaches” into its Take Shape for Life (TSFL) division. A month ago, the most recent report on Medifast’s recruitment business was published by multi-level marketing expert Robert FitzPatrick, and Medifast’s management promptly misled shareholders by claiming these allegations were made by “convicted felon” Barry Minkow.

You don’t have to look far for examples of the ineptitude of the American Government. They waste billions and billions of dollars each year, but somehow, we’re supposed to believe they’ll do better with health care?

Hardly. It’s not even a challenge to find examples of waste and mismanagement in our government. And it would be irresponsible for citizens to believe they’ll do anything different when they’re in charge of our health care. In addition to the massive amount of money our government will waste, they will simply do a bad job with health care. Sorry, but I trust my current doctor more than I trust the system.

Timothy Sykes is a fantastically successful blogger, penny stock trader, and educator. He makes a living by teaching people how to recognize “pump and dump” schemes by penny stock promoters… and then short those stocks for a profit. They make money when the price of the stock they’ve shorted goes down… which is inevitable if you can identify a stock that is all hype and no substance.

What is a pump & dump? Essentially the promoters of a virtually worthless stock (worthless, because the company is a sham of some sort) do mass mailings of marketing materials. This is the pump. They hype a company with false and misleading information, hoping to interest people in buying the stock (taking long positions). As those people start buying up shares, the price of the stock rises rapidly. While this is happening, people who previously held the stock start selling (at an inflated price, thanks to the all the buying activity generated by their hype). This is the dump. The people selling make a ton of money on their stock.

Who do you trust? That’s an issue that often arises for the former CFO of Crazy Eddie, Sam Antar. He’s been writing extensively about the financial statement fraud at Overstock.com, and has been dismissed by some as a con artist with ulterior motives.  But Sam has been vindicated, as Overstock.com has announced another restatement of earnings, meaning the company has a full decade of inaccurate financial statements now on file with the SEC. (Thankfully, the officers and directors of Overstock.com don’t have to take any responsibility for repeated misstatements of the financials, and are still getting health bonuses!!!!)

An article in today’s Compliance Week, Koss Fraud Spotlights Small Filers’ Internal Control Issues (subscription required), quotes me on internal controls and the auditors as it relates to the huge fraud committed by VP of Finance Sue Sachdeva at Koss Corp (NASDAQ:KOSS).

I’m no fan of Sarbanes-Oxley because I believe it was ridiculously expensive, and hasn’t really produced any meaningful results. Fraud is just as rampant as before SOX became law, and the only thing companies have to show for it is a huge bill from auditors and consultants.