28 Sep

Green Mountain Inventory Buildup: Fraud or Mismanagement?

gmcr green mountain coffee roastersSam Antar, former CFO of Crazy Eddie (massive fraud in the 1980’s) has been systematically uncovering fraud at Green Mountain Coffee Roasters (NASDAQ: GMCR) for years. In spite of this, investors continue to run up the price of the stock, believing the hype and the numbers put out by management.

Yesterday, Sam exposed even more about the potential fraud, targeting suspected inventory manipulation that could fraudulently inflate GCMR’s earnings. The overstatement of inventory improperly inflates earnings, and Sam surmises that Green Mountain may be doing exactly that. Read More

21 Feb

Materiality at Overstock.com Inc.

Sam Antar made this nice find in regard to materiality, one of many issues at Overstock.com (NASDAQ:OSTK). You see… materiality is an issue because, in addition to “unusual” material items at Overstock, we’ve seen several immaterial “unusual” items as well.

Users of financial statements have a tendency to overlook “immaterial” items, because by definition, they are quite small and likely don’t make much of a difference when you look at the financial statements as a whole

But don’t be fooled. Items deemed small and “immaterial” can in fact be very important to the financial statements. So says the SEC in Staff Accounting Bulleting 99: Read More

20 Aug

Overstock.com and its phony earnings figures

Patrick Byrne, CEO of Overstock.com O.coToday on the White Collar Fraud Blog, Sam Antar has the first part of a three part series on the inventory numbers at Overstock.com. It’s curious how Overstock’s inventory numbers always seem to create more questions than they answer.

Sam has some insight into this. As the former CFO of Crazy Eddie, a company that eventually folded after a massive fraud was uncovered, he says that one of the keys to perpetrating the fraud for as long as they did was deflecting attention away from suspicious items. Always put the focus back on the positive; keep everyone looking away from the negative.

In that vein, Overstock’s CEO Patrick Byrne (who is the target of a federal investigation) seems adept at doing exactly that. Unless, of course, a fraud investigator or investigative reporter is looking at his numbers. Read More

02 May

Is Overstock.com Misrepresenting Inventory?

Patrick Byrne of O.coI’ve been taking a look at some of the inventory numbers in Overstock’s most recent 10-K. I have plenty to say about the issue, but thought it would be fun to raise just one question for now…

The 2006 Overstock 10-K represents the following:

We ended 2006 with $20 million of inventory, significantly lower than the $93 million we had at the end of 2005. From this lower inventory level, we expect to turn our inventory much more efficiently. We have entered 2007 with more attractive, higher margin inventory, and as a result, we expect our gross margins in 2007 to increase significantly over 2006 levels. Read More