This level of logic from the supporters of Patrick Byrne and his supporters is pathetic. Sam Antar has brought up the issue of’s (NASDAQ:OSTK) violation of SEC regulations in reporting EBITDA.

The result of that improper reporting? EBITDA is materially overstated by and the company’s financial results look better than they really are. (Stock price manipulation, anyone?)

And here’s how the numbers worked out:

Overstock phony EBITDA Q1 2007: ($8,269,000)
Corrected EBITDA Q1 2007: ($13,573,000)

Overstatemenet Q1 2007: $5,304,000

Overstock phony EBITDA Q1 2008: $3,524,000
Corrected EBITDA Q1 2008: $2,185,000

Overstatement Q2 2008: $1,339,000

In my opinion, overstatements like this are material, and is violating SEC rules by reporting these phony numbers.

But to the Byrne/Overstock, supporters, these numbers are actually good! How can that be? Well using the phony numbers, Overstock improved in 2008 by $11.8 million. Using the corrected numbers, Overstock improved in 2008 by $15.8 million. Therefore, Sam’s analysis actually helps Overstock.

Are they kidding? I don’t think so. Somehow the idea that numbers were materially overstated, and the corrected numbers are materially lower… is now a good thing.

Seriously, if you have to twist the logic so much that some “improvement in EBITDA” is your focus rather than the fact that Overstock and its auditors PricewaterhouseCoopers reported fraudulent numbers that materially overstated EBITDA, you don’t have much of a case.

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