Month: April 2010

No Surprise: MPS is Cutting Teachers Because of Out-Of-Control Employee Costs

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Yesterday it was reported that Milwaukee Public Schools is cutting 684 jobs, which includes 260 teachers. The reason? Out-of-control employee costs, thanks to the teachers’ union.

The first thing you’ll hear is how the district doesn’t have money, and more tax money needs to be directed to MPS because it’s for the children. But the problem is not that the district doesn’t have enough money. I’ve reported several times on how the enrollment is declining while the budget keeps going up. The total budget gets increased year after year, and on a per student basis, the budget is skyrocketing. Witness:

Read moreNo Surprise: MPS is Cutting Teachers Because of Out-Of-Control Employee Costs

Marquette Alumni Awards video

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Last weekend I took part in an amazing celebration at my alma mater, Marquette University. I was honored with the Entrepreneurial Award from the College of Business Administration. I am grateful to my family for making that education possible for me, and was humbled to have wonderful friends and colleagues join me for the awards ceremony. This is the video that was made to commemorate the weekend.

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Medifast Lawsuit: Anti-SLAPP Motions Filed

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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.

Anti-SLAPP motions have been filed in the Medifast lawsuit by me and by my co-defendant, Robert FitzPatrick. My motion can be read in its entirety here, and Fitzpatrick’s can be read here.

SLAPP stands for Strategic Lawsuit Against Public Participation.  It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.

Read moreMedifast Lawsuit: Anti-SLAPP Motions Filed

A Comparison of Medifast and Pre-Paid Legal

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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.

This week Barry Minkow and iBusiness Reporting did a comparison of the business models of Pre-Paid Legal Services Inc. (NYSE: PPD) and the Take Shape For Life division of  Medifast Inc. (NYSE:MED).  Pre-Paid Legal is being investigated by the SEC, and Barry wondered how the compensation plans of Pre-Paid and TSFL stacked up. The obvious question is whether Medifast could eventually face the same scrutiny as Pre-Paid Legal.

It seems that the SEC investigation of Pre-Paid Legal has focused on its stock buyback program (this is how executives and insiders get rich) and how the company is marketed. They also asked for data on membership statistics, so this could open the door to evaluating whether the practices of the company are like a Ponzi scheme.

Read moreA Comparison of Medifast and Pre-Paid Legal

Medifast Changes Auditors: Was Barry Minkow Right When He Criticized Former Auditors?

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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.

Last week, Medifast Inc. (NYSE:MED) announced that it changed auditing firms. The company previously used Bagell, Josephs, Levine and Company, and they were criticized for the choice of auditors by Fraud Discovery Institute and Sam Antar. FDI’s criticism was summed up in a press release:

Expert’s letter sites possible stock-touting of Medifast (NYSE:MED) stock by company’s single-officed, New Jersey based, outside auditors through their alleged independent investment entity. Expert also notes that PCAOB cited Medifast auditors for significant deficiencies in three of six audit engagements reviewed by them, or 50% of audits in their sample.

Antar simply said that if Medifast was serious about the quality of its auditors, then it would find new ones.

Read moreMedifast Changes Auditors: Was Barry Minkow Right When He Criticized Former Auditors?

Medifast Lawyers Continue to Lie to the Court

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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.

The Medifast (NYSE:MED) lawsuit against Barry Minkow, Fraud Discovery Institute, me, Robert FitzPatrick, William Lobdell, and others marches on. Yesterday, the Medifast lawyers filed an amended complaint in the case. The passage of time has not made Medifast or its lawyers more honest, however, as the amended complaint repeats factual inaccuracies (those are called lies in my world) and even expands on them.

Grab a cup of coffee and kick up your feet while you read the amended complaint. The document now alleges a civil conspiracy related to Medifast’s Take Shape for Life (TSFL) division, and repeatedly refers to the defendants as co-conspirators. I can’t speak for the other defendants, but I certainly know that I conspired with no one. I simply performed services for a paying client, and I wrote about Medifast on this blog in a continuing effort to advance the discussion of the pitfalls of multi-level marketing.

Read moreMedifast Lawyers Continue to Lie to the Court

Ex-Con Now Walks a Financial Tightrope

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Cary Spivak – Milwaukee Journal Sentinel

The latest business plan at the lofty-sounding Fraud Discovery Institute seems invincible: Gather negative information about a company, place a bet that the price will decline by selling its stock short, and then publish the negative information online.

When the stock price plummets, you cash in.

Read moreEx-Con Now Walks a Financial Tightrope

Daughter Turns in Mom in Tri Energy Ponzi Scheme

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More than two years ago, I mentioned here a news story about a Ponzi scheme called Tri Energy Inc. The Securities and Exchange Commission first took action against the company in 2005:

The Securities and Exchange Commission yesterday obtained a temporary restraining order, an asset freeze, and other emergency relief, in a civil action filed against several individuals and entities alleged to be perpetrating an ongoing affinity fraud and Ponzi scheme. According to the Complaint, defendants have defrauded hundreds of investors of over $12 million by promising returns of 100% or more within 60 days. The Complaint alleges that defendants have been telling investors that these extraordinary profits were to be generated in part by helping an unnamed Saudi Arabian prince move gold from Israel through Luxembourg to the United Arab Emirates. In reality, according to the Complaint, although some money has been paid out to investors, these funds appear to have come from new investor money, and substantial amounts of investor funds have been transferred to bank accounts controlled by the proposed defendants and relief defendants.

Read moreDaughter Turns in Mom in Tri Energy Ponzi Scheme

Koss Fraud: Unrecorded Revenue?

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How does a company with about $40 million in annual revenue fall victim to a $31 million (or more) fraud by the VP of Finance? Simply, Koss Corp. gave Sue Sachdeva the keys to the castle. She apparently ran the company’s finance function with little oversight from anyone else.

Koss has done something I think is a bit unusual. In a filing with the SEC, the company detailed the alleged theft by year:

Read moreKoss Fraud: Unrecorded Revenue?