The train wreck continues

For almost two years, Sam Antar (convicted felon and former CFO of Crazy Eddie) has been writing about (NASDAQ:OSTK) and his questions about their financial reporting and disclosures. I became interested in the company’s financial statements and SEC filings a few months later and began blogging about Overstock and nutty CEO Patrick Byrne as well.

One constant since then has been the criticism of fans of Patrick Byrne and Overstock. Byrne has been trying to silence his critics, and even went so far as to hire cyberstalker Judd Bagley to threaten and intimidate the company’s critics.

The fact always remained that there were inconsistencies in disclosures, unusual financial statement items, and a general appearance that management at was not forthcoming in its presentation of financial results. The questionable matters included:

The critics kept writing, and now the truth comes out. Byrne and his paid stooges continuously tried to discredit the critics, claiming there was some conspiracy to take down Overstock. The truth has always been that is a horrible company run by an incompetent and mentally unstable CEO.

Sam Antar lays out the situation quite nicely in a post on his blog. As it turns out, the criticism was all legitimate, and all financial reports and disclosures made by over at least the last 5 years have been false and unreliable.

All along, Patrick Byrne and VP of Finance David Chidester have been claiming that the company’s financial statements complied with GAAP and the disclosures were proper. Those claims were false. Sam reports:’s (NASDAQ: OSTK) new amended financial reports filed today, vindicates findings, first exposed in this blog, that the company violated Securities and Exchange Commission Regulation G governing non-GAAP disclosures, such as EBITDA and materially overstated its non-compliant EBITDA in financial reports dating back to Q2 2007. Even worse, disclosed in its 10-Q for Q3 2008, released today, that its restatement of financial reports dating back to 2003, due to accounting errors relating to revenues, customer refunds, and customer credits, may subject the company to future regulatory action from the Securities and Exchange Commission and litigation from shareholders seeking damages. also reported that there was a material weakness in its system of internal controls over financial reporting. For those not familiar with the terms “material weakness” and “internal controls,” this represents something very serious for this public company.

And Overstock has a history of issuing inaccurate financial reports. Sam writes:

Earlier this year, the Securities and Exchange Commission discovered that intentionally did not report revenues in compliance with GAAP, since its inception. In February 2006, the company disclosed inventory accounting errors for fiscal years 2002 to 2005.

Hopefully, investors in will take these matters seriously. One wonders why anyone would hold a long position in Overstock at this point, not just because of the company’s inability to turn a profit, wild projections that never seem to materialize, and failure to provide accurate financial data… But because in general this company and its management cannot be trusted. Heed the warnings that have been coming (but dismissed by many) for the last two years. Bail now.

UPDATE: Gary Weiss, fellow Overstock stalkee, has some additional thoughts here.

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