Will it ever stop at Overstock.com?


To hear Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne tell it, everyone is gunning for them. The company is fantastic. Patrick is fantastic. Everything is above board and everyone is forthcoming with everything.

However, another issue has come up. It’s now clear that there were shenanigans with the resignation of President Jason Lindsey and the statements made and documents filed in the days around the resignation.

Sam Antar has discovered proof that Jason Lindsey’s resignation from Overstock.com was backdated.

Here’ the 8-K that Overstock.com filed on January 2, 2008 with the SEC (click on it to see it full-size): Continue reading

SEC Drops Informal Investigation into Usana Health Sciences


Last week the Securities and Exchange Commission (SEC) informed Usana Health Sciences (NASDAQ: USNA) that it was closing its informal investigation into the company and taking no further action at this time. The pro-MLM camp has trumpeted this as a complete victory for Usana, proclaiming that the SEC basically said their business structure was completely legal and all was rosy at the company.

What does the letter from the SEC to Usana really mean? It means that the SEC is closing their investigation for now. Nothing more, and nothing less. Continue reading

More on the auditor change at Catapult


Last week I wrote about Catapult Communications (NASDAQ: CATT) switching from Deloitte & Touche to a much smaller local firm, in a post called Big Four = Big Fees. In that post I referenced the CFO.com article from which I got my information. The article focused on the difference in fees between the firms: $985,000 for Deloitte and $561,000 for the small firm. That big savings was portrayed as the reason Catapult switched.

And in rides Francine McKenna of re: The Auditors. She raises a good point. Why did Catapult go to great pains to detail the reason for the switch from Deloitte to a virtual no-name firm? Was Catapult trying to embarrass Deloitte?

Well I think Francine may have found the answer, one which she suggests CFO.com might have found if they hadn’t just accepted Catapult’s story at face value. You see, in the company’s annual report for the year ended September 30, 2007, it was noted that a material weakness from the prior year was remediated.

What was this weakness, you ask? Well, you can see what the weakness was if you read the fix that was noted in that annual report:

The Company’s Chief Financial Officer performs a detailed quarterly review to confirm that the Company’s accounting for its cash, cash equivalents and short-term investments is in accordance with the requirements of generally accepted accounting principles in the United States.

Uh…. if the “fix” is that the CFO now reviews cash and short-term investments to see if they’re reported in accordance with GAAP, then the weakness was that he wasn’t doing it before! And…. not doing it was deemed a material weakness by Deloitte.

That’s pretty bad. And who knows.. maybe Catapult is upset that Deloitte forced them to fix the problem and make the disclosure.

Francine also notes that Catapult switched auditors in January of 2006, too, dumping PriceWaterhouseCoopers and hiring Deloitte.

Francine and I agree on this: It is not uncommon for companies to go opinion shopping.

Could that be what we’re witnessing here?

UPDATE: More on Dennis Howlett’s take is found here.

Pyramid Scheme Alert Reflects on 2007


Multi-level marketing will go down in history as one of the great frauds of our times. It deceptively wraps its harmful scam with the real needs and desires of people today – additional income, stay home with the family, independence, entrepreneurship, high income without high investment or training, and a group that will help you succeed. MLM is an Enron story, glossy and exciting to those who invest. But in the end, it causes massive harm, employs sophisticated deception, and it is corrupting our government.

MLM is an American-based “sales ” scam, and has spread to more than 70 other countries, just as Nigeria has spread its famous “bank account” scam worldwide. Continue reading

Usana executives aren’t the only ones lying about their credentials


See! Usana Health Sciences (NASDAQ: USNA) CFO Gill Fuller was right when he said that everyone was lying about their credentials (including him!).

The CEO of CellCyte (Public, OTC:CCYG) was recently busted for embellishing his resume, and the stockholders have paid dearly. Gary Reys, the co-founder and CEO of CellCyte Genetics was busted by The Seattle Times, who challenged the accuracy of statements in his biography on the company website.

The original biography on the website says, in part: Continue reading

Test Your Scam Alert Skills


The Colorado Division of Securities has a little quiz to help you see if you know anything about investment fraud, or if you’re a scam victim waiting to be taken advantage of. In addition to the quiz which helps you see if you can spot an investment scam, there’s also a checklist to help you evaluate these investment “opportunities” in the future.

The checklist and my comments: Continue reading

New site ranking tool takes on Google


Bloggers have been infuriated by Google’s changes to their PageRank system. In particular, Google is not ranking blogs and sites that participate in PayPerPost. Some site owners depend upon their page rank for advertising revenue… that is, some advertisers rely heavily on page rank, and if a site does not have one, they’re less likely to get advertisers.

Google’s PageRank is based upon a proprietary (i.e. secret) algorithm which calculates the rank based largely upon incoming links to site. It doesn’t just count links, though. It takes into consideration the quality of the site that links to your site. You get more credit for a link from a valuable site than you do from a worthless site like a link farm.

So bloggers are upset for being left out of the PageRank system if they’re using PayPerPost. They’re fighting back, and Izea (the new name of PayPerPost) has come up with something new. The new system is called IzeaRanks or RealRank, and they claim they’re going to have the “real” rankings: proving how much traffic sites get and therefore how valuable they are to the readers.

The thing is… I understand where Google is coming from. What good are paid posts anyway? So a company does a campaign where they pay 500 bloggers to write about their product. Does that mean that the product is popular among bloggers? No. It means bloggers were paid to make people think it’s popular. They’re paid to create buzz.

So why should bloggers who only write about things because they get paid for it get “credit” in the blogosphere? Is that content legitimate content? Not in my eyes. And apparently not in the eyes of Google, either.

I have some doubts as to whether or not this new ranking system will mean anything in the long run. I think they’d have to get participation from site owners very quickly if they are to survive. I’m not against this ranking system by any means. If someone can create a valuable tool to analyze web traffic and site quality, I say they should go for it. The market can decide whether or not the tool is legitimate or not.

But that doesn’t stop me from agreeing with Google on their stance against sites that post about topics because they’re paid to do so.

Note: I’m a paid blogger for AOL, posting on WalletPop, BloggingStocks and Luxist. We get paid per post, but our content is not controlled by anyone. Individual bloggers have complete editorial freedom to write about any and all topics that pertain to the particular blog(s) they write about.

40 days of Frivolous Tax Arguments: Federal Reserve Notes are not income


Here the jokers are saying that our money isn’t legit, so it’s not really money, so it can’t be taxed. Really? Well I wonder what they do when they go to the grocery store? Do they use *gasp* money????

The truth is that Congress can call something money if they want to. The Constitution says that gold and silver are the only legal tender in the U.S., but that Congress could declare other legal tender if they wanted to. And they did. So we have it. It’s called money. Those pieces of paper that we exchange for other stuff.

So money is really money, and taxes must be paid on money.


Book Publishing: Essentials of Corporate Fraud is done!


It’s official! My first book, Essentials of Corporate Fraud is done. It is on its way to the printer, to be ready for shipment by March 14, if not sooner.

The hard work was in writing it, the stuff that came after that was a relative breeze. Although when people ask me if it was hard to write, the honest answer is no. It really wasn’t hard to write because the book is full of the core fraud prevention and detection material that I teach about and write about all the time. So it was more a matter of finding the time to sit down and do the writing. Continue reading

40 days of Frivolous Tax Arguments: Only foreign-source income is taxable.


The argument that there is no law that allows the government to impose a tax on income from within the United States is plain wrong. The tax rules say that all people in the United States, have to pay tax on income inside and outside the United States. There are provisions to prevent double taxation, so that if your earnings are taxed in a foreign country, you don’t get taxed again in the U.S.