Patrick Byrne

Overstock CEO Patrick Byrne Had No Idea That There Was a Gun in His Luggage When He Went to the Salt Lake City Airport

It's been quite a while since we've checked in with Arkham Asylum escapee Patrick Byrne. For better or worse, OSTK has managed to keep their financial reporting relatively respectable and thus his smiling mug has not graced these pages.  Today we pick up the beat again and it's more or less in line with what you […]

SEC Concludes That It Doesn’t Need to Kick Overstock.com on the Way Down

The financial gumshoes at the SEC have closed their investigation of Overstock.com and have concluded that no enforcement action is necessary. Naturally, former Arkham Asylum resident and current Overstock.com CEO Patrick Byrne sees this as a vindication: "We are the ones who brought all these matters to light, we made the corrections, we fully disclosed these […]

Confirmed: Overstock.com Is Doomed

Overstock.com has had its detractors over the years. Everyone from Barry Ritholtz to Felix Salmon to Joe Weisenthal to, of course, Sam Antar have been calling shenanigans on the company on everything from financial reporting to social media stalking. The company has made some dumb decisions and they seem to be willing to blame anyone and […]

Your Ernst & Young Entrepreneurs Of The Year Include the Dude From Groupon, Patrick Byrne

We really don’t pay much attention to the E&Y Entrepreneur thingamajigs because, well, it’s boring. Sure, we like entrepreneurs just fine but c’mon. These guys are filthy rich and successful and E&Y gives them trophies? Is this sort of commercial circle jerk really necessary? Regardless of our personal feelings, the awards are a big deal – Jay Leno hosted this year’s event for crissakes – and the Google News feed for E&Y is constantly clogged with stories about people advancing to the next round of voting like some sort of capitalist March Madness.

Anyway, Casa de Turley officially announced this year’s winners over the weekend and Reid Hoffman and Jeff Weiner, founders of Facebook for Suits LinkedIn, are your entrepreneuriest entrepreneurs.


In addition to the dynamic duo there are quite a few guys you’ve never heard of that are doing well for themselves including Roger Linquist and Jose R. Mas. See? Never heard of them, have you?

There are also some winners that you have heard of including Andrew Mason, one of the co-founders of virtual clipfest and increasingly looking insolvent Groupon. As well as Patrick Byrne, the founder of Overstock.com. You know, the guy on the Segway. The guy who Sam Antar can’t help to poke and prod every chance he gets. The guy whose company is being sued by seven California counties thanks to a Walmart sticker. The guy who may have had some weirdo trolling a bunch of bloggers’ Facebook friends. Yes, that Patrick Byrne.

But HEY! not every entrepreneur can be squeaky clean. It’s not like he’s Pete Rose or anything. Unless you count this.

[via E&Y]

Social Media Poses Enough of a Risk to Overstock.com That They Disclosed It in Their 10-K

It’s been quite some time since we picked up the Overstock beat but Gary Weiss picked up something in the company’s recently filed 10-K yesterday that makes us wonder if the company was shooting for irony or if they’ve given up on blaming the “shorts” turning instead to “social media,” which, similar to the anti-short campaign would allow them to encompass a number of villains without naming anyone directly.


From “Note 1A: Risk Factors” section of the company’s notes to the financial statements:

There has been a marked increase in use of social media platforms and similar devices, including weblogs (blogs), social media websites, and other forms of Internet-based communications which allow individuals access to a broad audience of consumers and other interested persons. Consumers value readily available information concerning retailers, manufacturers, and their goods and services and often act on such information without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning the Company may be posted on such platforms and devices at any time. Information posted may be adverse to our interests, it may be inaccurate, and may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could be used for dissemination of trade secret information, compromise of valuable company assets all of which could harm our business, prospects, financial condition and results of operations.

As Gary points out, this disclosure is especially rich since Patrick Byrne had a goon using Facebook to stalk critics like Gary, Sam Antar, Barry Ritholtz among others which of course was disseminated in various social media outlets. Newsflash to Overstock’s risk managers: when people are being pursued by creeps on the Internet, they complain about to EVERYONE THEY KNOW.

One could easily argue that Segway accidents at the office pose just as great of a risk to key employees – and thus a disclosable item – but perhaps that’s covered under their D&O policy? It still seems plausible that disclosure would still be warranted. Additionally, the risk of a good snowfall might cause some of Salt Lake City-based company’s employees to call in sick to enjoy the fresh pow could have resulted in a late filing which is certainly something the SEC would want to know. We know KPMG has a crack squad of auditors all over this engagement but it’s conceivable that they overlooked some other risks. If you’ve got ideas on what those might be, let us know below.

Accounting News Roundup: The Problem with American Apparel’s non-CPA CFO; Diversity Still Lags in Accounting; Patrick Byrne Denies Insider Trading Accusations | 08.23.10

Potash says in talks for superior deals [Reuters]
“Potash Corp’s board urged shareholders to reject BHP Billiton’s hostile $39 billion offer and said it was in talks with a number of potential suitors for a superior deal.

Potash Corp, the world’s largest producer of potash based in the Canadian province of Saskatchewan, said superior offers or other alternatives are expected to emerge.

Discussions are on with several of these third parties in order to generate superior offers, the company said in a statement.”

How to Shine in a Skype Interview [FINSying across the country for a second round of meetings, you may be asked to interview for a job from the comfort of your living room.

While it might sound less stressful to some than an in-person meeting, such an interview can be filled with landmines for job candidates.”

The Problem With a Non-CPA CFO [FEI Financial Reporting Blog]
Francine McKenna guest-posts over at FEI for the second time, this time discussing the American Apparel situation and noting that 31 year-old CFO might be in over his head.

Goldfarb Branham LLP Investigating Shareholder Claims Against American Apparel, Inc. [Business Wire]
Speaking of APP, investigations are starting, “Goldfarb Branham LLP is investigating American Apparel, Inc. (APP 0.75, 0.00, -0.09%) due to allegations that the company may have issued materially inaccurate statements to investors concerning its 2009 financial results and the circumstances surrounding the replacement of American Apparel’s auditor.”

Movement afoot to increase diversity in accounting industry [Pittsburgh Business Times]
“Sam Stephenson, a partner at ParenteBeard LLC, a Downtown-based certified public accounting firm, brings an interesting perspective to the equation as a black man who has worked in the profession for nearly four decades. During his long tenure, he has seen improvements in efforts to recruit and promote women in the profession, but ethnic diversity still lags behind.

‘We need to bring this issue to the attention of individuals who run local and regional firms because they may not be aware that this is a problem,’ said Stephenson, who serves as a member of the Pennsylvania State Board of Accountancy, which enforces the licensing rules for CPAs. ‘A lack of diversity often means missed opportunities to attract talent and clients.’ ”


Preparer Costs Will Increase Some; Taxpayer Costs Will Increase More [Tax Update Blog]
Joe Kristan responds to fellow practitioner/blogger Robert Flach’s question of how the new tax preparer registration will affect costs for consumers more so than tax preparers.

Gays See Complex, Changing Tax Picture [Dow Jones Adviser]
“Gay couples are taking one step forward, one step back when it comes to their tax rights. Not to mention sideways.

The shifting landscape of new rules and initiatives makes it a big challenge to provide same-sex partners with good tax advice.

In Massachusetts, a successful challenge to a federal law denying gays tax breaks that heterosexual couples get could mean progress, but only if it stands up to an expected government appeal.”

Patrick Byrne Refutes Insider Trading Claims [Forbes]

Sam Antar Respectfully Requests to Be Included in the Overstock.com Earnings Call

Sam is certainly as insightful as the Easter Bunny:

From: Sam E. Antar

To: Patrick Byrne
Board – Jonathan Johnson
Joseph Tabacco

Dear Patrick Byrne and other persons from Overstock.com:

Overstock.com’s Q2 2010 conference call is scheduled for today at 3 PM ET. I will be calling in. I expect to be permitted to participate in said call and ask relevant questions about Overstock.com. As I recall, in 2005 you allowed a lay person named Phil Saunders AKA Easter Bunny to participate in the call.

Sam E. Antar


Gary Weiss predicts that Sam won’t be allowed to participate but stranger things have happened (e.g. Overstock turned a profit last year).

Earlier:
Remember the $3 Million in Overstock Shares Patrick Byrne Sold? Sam Antar Does

Remember the $3 Million in Overstock Shares Patrick Byrne Sold? Sam Antar Does

Last we heard from Patrick Byrne, the Overstock.com CEO and Farmville enthusiast, he had just disposed of 140,000 shares of OSTK via High Plains Investments, LLC, an entity 100% owned by PB. This had a few people scratching their heads, including us.

At the time, we wondered why Patsy would need to dump the shares, especially after all the excitement the company generated by turning their first profit ever in 2009 and a profitable Q1. We were hoping that the KPMG engagement team – that was doing such a bang-up job – would get some new Segways to cruise SLC but pesky independence rules probably got in the way of that.


Regardless, Q2 wasn’t expected to be a showstopper but when asked, Patsy wasn’t worried, telling Investor’s Business Daily, “Given that in 2009 we had close to $40 million of free cash flow (and $8 million net income), I think we should just continue building the intrinsic value of the business right now.”

Well! The Company reported its Q2 earnings after the close yesterday and, um, they missed the numbers badly. The $0.02/share loss expected by analysts was tripled with a loss of $0.06/share. As you might expect, the shares are taking a beating and Byrne nemesis Sam Antar finds this just a little bit fishy:

[N]ine days after Q2 2010 ended, Byrne led investors to believe that Overstock.com was going to break even in that quarter by citing previous year’s free cash flow numbers. However, Byrne did not mention that Overstock.com’s free cash flow for the six months ended June 30, 2010 was negative $54.8 million compared to negative $35.8 million in the previous year’s comparable perid [sic] or about $19 million lower.

So, there’s that. OH! And the $3 million in shares. Don’t forget that.

Overstock.com CEO Patrick Dumped Stock Ahead of Bad Earnings Report and Misled Investors About Earnings [White Collar Fraud]

People Get More Satisfaction From Filing Their Taxes Online Than Using Facebook

The emphasis isn’t needed but we’ve provided it anyway:

Despite being the most popular website in America, consumers don’t like Facebook, according to the 2010 American Customer Satisfaction Index (ACSI) E-Business Report, produced in partnership with ForeSee Results. Facebook scored 64 on the ACSI’s 100-point scale, which puts its satisfaction even lower than IRS e-filers. This puts Facebook in the bottom 5% of all measured private sector companies and in the same range as airlines and cable companies, two perennially low-scoring industries with terrible customer satisfaction.

It makes sense, really. If someone is filing their taxes electronically and something goes wrong, he/she is probably able to keep it together long enough to call up the IRS and tell him what the problem is. On the other hand, if Farmville starts acting up on Patrick Byrne (just as an example), we’re guessing the man loses his shit.

Why Did Patrick Byrne Sell $3 million in Overstock.com Shares?

So Patrick Byrne (via his 100% wholly owned entity High Plains Investments, LLC) sold 140,000 OSTK shares in the past five days and that has a few people talking/wondering aloud about what the hell is going on.

Barry Ritholtz, who is long OSTK (quantitative drivers) despite, “I…think it is a steaming pile of shit, that the CEO is an asshole, and that the entire company is probably corrupt,” is really curious:

Is Byrne in possession of material insider information? Would he be so stupid as to sell the shares? (I doubt anyone could be that dumb).

Perhaps he sees a favorable outcome to the SEC investigation? Maybe he is raising money to pay a fine?

These are all excellent jumping off points (although we disagree with the notion “I doubt anyone could be that dumb”) but let’s explore other possibilities:

A) Segways for the KPMG audit team.

B) Reverse Psychology – he’s done fighting the short selling crowd (or is he?)

C) He’s going to apologize to Sam Antar monetarily (how generous he will be, is another matter entirely).

D) He needs some cash for a Father’s Day gift.

E) Needs to feed the Farmville addiciton.

These are merely some ideas. And there’s always the possibility that PB has gone right out of his mind. Share your own, should you feel inclined.

Long OSTK, Short Byrne [The Big Picture]
Proxy Statement/Schedule 14A [SEC.gov]
Patrick Byrne Pockets $3.1 Million from Dumping Overstock.com Shares [White Collar Fraud]
Patrick Byrne Dumps His Overstocked Overstock Shares [Gary Weiss]

Does Father Know Best About Restatements?

“My father brings tremendous wisdom and experience, which will help Overstock continue to grow and mature as a company. I am pleased that the Board of Directors nominated him, grateful that he was elected by the stockholders, and look forward to working with him again.”

~ Patrick Byrne, on his Dad, Jack Byrne, rejoining the OSTK board of directors.

Overstock.com Blames Restatements on Accountants

Last week the financial three-ring circus Overstock.com officially put an end to its 2009 by filing its 10-K with the SEC (after a two week extension). Ring managed to keep his promise about turning a profit and managed to keep his head about it in his letter to shareholders only mustering, “It’s nice to be profitable.”

As you might expect, Sam Antar was not impressed and since the Company’s filing he and others (including Gary Weiss) have pointed out major internal control problems, mistakes in the footnotes, false disclosures related to an alleged “tax dodge” and now, NOW the most unforgivable thing yet.


Sam notes that the Company, in its infinite wisdom, has decided to blame its own accountants and their lack of knowledge for the most recent restatement in its 10-K:

We lacked a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for and perform adequate supervisory reviews of significant transactions that resulted in misapplications of GAAP.

Information technology program change and program development controls were inadequately designed to prevent changes in our accounting systems which led to the failure to appropriately capture and accurately process data.

These are the only two “control failures” identified by the Company in its filing that constitute material weaknesses. Naturally, the management team and the audit committee agreed with this assessment, “Our management concluded, and the Audit Committee of the Board of Directors agreed with management’s conclusions,” that former CFO David Chidester and former Treasurer Rich Paongo are the ones at fault here.

Is that class or what? So did Patrick Byrne finally realize that David Chidester and Rich Paongo, after several years at Overstock, lacked the “necessary knowledge, experience and training” so they and the Company “parted ways” (aka fired their sorry asses) for the latest restatement? What about the previous umpteen restatements? Why wasn’t didn’t the parting of ways occur after those?

Regardless of the answers to these questions, Sam has appealed to none other than Mary Schapiro to make sure the shenanigans don’t continue:

From: Sam E. Antar
Sent: Monday, April 05, 2010 3:56 AM
To: ‘Mary Schapiro’; ‘enforcement@sec.gov’;
Cc: ‘Patrick Byrne’; ‘Joseph Tabacco’; ‘Board – Jonathan Johnson’
Subject: Open Letter to the Securities and Exchange Commission (Part 8): Bring Enforcement Action Against Overstock.com for False and Misleading Disclosures
Importance: High

To Chairperson Mary Schapiro:

Enclosed is a link to my blog post entitled, “Open Letter to the Securities and Exchange Commission (Part 8): Bring Enforcement Action Against Overstock.com for False and Misleading Disclosures.”

Link here: http://whitecollarfraud.blogspot.com/2010/04/open-letter-to-securities-and-exchange.html

The blog post referred to in the link above, is to be considered a formal complaint to the SEC for continued false and misleading disclosures by Overstock.com and its officers. Please note that as a courtesy, I have cc’d Overstock.com on this email.

Respectfully,

Sam E. Antar

Is the SEC not interested in a slam dunk case? We’ll see.

Quote of the Day: That Profit Really Put Patrick Byrne in a Good Mood | 04.01.10

“Dear Sam, I apologize. Sincerely, Patrick”

~ Patrick Byrne, finally responding to Sam Antar.

In bizarro world.

Overstock.com Turns a Profit; Patrick Byrne Writes a Very Un-Patrick Byrne Letter to Shareholders

This morning we thought the KPMG audit team working on Overstock.com would continue slaving away through the extension deadline tomorrow to get that beast of 10-K finished. Well! Turns out they’ll bet of you tonight because the OSTK 10-K has been filed and, as promised Overstock shareholders, your humble servant Patrick Byrne and Co. are reporting an annual profit for the first time ever!


After such a high, restatement or not, we’re guessing Sam Antar definitely won’t be getting an apology but Gary Weiss has already noted a couple of things:

First–stop the presses! Overstock’s auditors at KPMG says that Overstock has insufficient internal controls.

Second, the Marin County District Attorney and four other DAs in northern California want the company to fork over $8.5 million to settle consumer ripoffs by Overstock. The company disagrees and is fighting it, so …. No, wait a moment, make that read “$7.5 million.”

First off, we share Gary’s shock — SHOCK! — on the insufficient internal controls revelation. Second – AUDITORS! We talked about this, remember? Read the 10-K carefully. Overstock’s “Risk Factors” section runs 25 pages for crissakes. A million fucking clams can’t get missed!

You know what though? Mistakes happen, so we’ll let it slide.

Oh, and about that letter to shareholders. Patsy doesn’t bring up former auditor Grant Thornton once, doesn’t quote Nietzsche, compiain about short sellers, bring up Facebook, or say anything remotely antagonizing (although on page 32, the Company’s states he still might).

This makes think: 1) Is he not feeling well? 2) We want the old Patrick back! Read for yourself:

Dear Owner:

In Q4 our revenues grew 27%, twice the ecommerce industry’s rate, and we earned $12.7 million in net income. In 2009 we grew revenues 6%, earned $7.7 million in net income, generated $46 million in operating cash flow, and generated $39 million in free cash flow. It’s nice to be profitable.

I am proud that, for the second year in a row, we rank number 2 in the NRF/Amex survey of American consumers, behind only LL Bean and ahead of Amazon, Zappos, eBay, Nordstrom, and many other fine firms.

As you may know, at the end of Q4 we engaged KPMG as our independent auditors, and announced that we were restating our FY 2008 and Q1, Q2 and Q3 2009 financial statements. I thank you for being patient with us as we worked through the questions raised by the SEC, the transition to the KPMG team, and the extra time it took to ensure that our financial statements are accurate.

I look forward to our conference call next Monday. Until then, I remain,

Your humble servant,

Patrick M. Byrne

The Latest Developments in the Overstock Accounting Mess

In case you haven’t been paying attention, this has been a banner week for the alleged but fairly obvious and ongoing Overstock.com accounting drama (aka “The Quarterly Lie”) and now’s your chance to get caught up. Thank me later (unless you are Patrick Byrne, in which case you are welcome to trash me later out of pure, outraged butthurtedness).

Gross violations of the sanctity of GAAP are not the largest of Overstock’s numerous accounting issues. I know, how could it get any worse? Sam Antar discovers GAAP violations both new and old in this, the latest hilariously fraudulent SEC filing by our friends at OSTK. What makes it even funnier is that they apparently attempted to slip in the new violations with old ones in the hopes that the SEC (and those of us paying attention) may not notice.

Overstock.com nonchalantly lumped in its latest GAAP violations with other GAAP violations previously disclosed by the company on January 29, rather than separately disclosing them. Those newly identified GAAP violations add to a long laundry list of other violations.

Well that’s cute. Now I may not be an SEC filing savant like some among us but, um, something smells wrong here. I’d say I can’t put my finger on it but I can, the only problem is I can’t seem to wash the stink off my finger.

Gary Weiss is also all over it (naturally) and is equally shocked that OSTK would attempt to casually insert new, previously undisclosed accounting violations in with the old, previously disclosed accounting violations as if, you know, it’s a good idea to just lump them all in together while we’re on the subject of violating GAAP accounting. I’m no CPA but if I were advising Overstock on its accounting practices, I might warn against netting its creative accounting in SEC filings for starters. Separately stated items, people, come on.

Do you think it’s merely a coincidence that Overstock has burned through two audit firms in a year’s time? Perhaps not and maybe KPMG has the magic touch that will turn Overstock’s straw financials into gold but if we were the betting type, we’d put our money on indictments and a really messy fall for the Salt Lake City outlet.

We’re all calling bullshit, Overstock. Your turn.

Sam Antar Is Still Waiting for an Apology from Patrick Byrne and By the Way, Has Never Engaged in Naked Short Selling

Sam Antar knows an accidental criminal hero when he sees one: his cousin Eddie Antar was hailed as a champion of cheaply-priced consumer electronics in the Crazy Eddie days, though the poor saps in New York didn’t realize he could price his goods so cheaply because he was stiffing the government on sales and payroll taxes. Patrick Byrne and Overstock.com are pushing to corner the accidental criminal hero market by denouncing the evils of naked short sellers (bad bad bad), of which they seem to be convinced Sam is one.

While we’re on the topic of OSTK’s campaign to end evil naked short sales, I hereby volunteer to help Overstock edit their naked short selling page, by the way, as it’s not only a dry read but a tad poorly-written. Just sayin. Helpful girl that I am, it’s the least I can do.


Anyway, Sam’s still waiting for his apology from Patrick Byrne but in the meantime, would like him to take back those mean things he said about Sam naked shorting them to death. In an email to the SEC, Byrne himself and Overstock.com audit committee member Joseph Tabacco this weekend, Sam sets the record straight:

First off, I have never been involved any illegal naked short selling.

Second, how can Overstock.com label me as an “anti-Overstock.com blogger” when:

I correctly reported in my blog that Overstock.com used an improper EBITDA from Q2 2007 to Q2 2008 in violation of SEC Regulation G to materially inflate its financial performance, in light of its later amended disclosures.

I correctly reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement.

Third, please note Utah Attorney General Mark Shurtleff received $5,000 in cash from Overstock.com a few days prior to writing his defamatory letter about me. Both Chief Deputy Attorney General Kirk Torgensen and Deputy Attorney General Richard Hamp acknowledged that Shurtleff’s claims about me were false in various tape recorded conversations cited in my blog.

Sam goes on to explain that he’s actually doing Overstock a favor by uncovering fraud that its own audit committee has seemed to, um, overlook. You know, so they can set themselves right with the SEC and skip the restatement next year, filing all those extensions can get pricey and time-consuming you know.

See, Patrick, why so hostile? We’re all just trying to help!

Three Ways That Patrick Byrne Can Apologize to Sam Antar

As you’re probably aware (if not, check the links below), it hasn’t been the friendliest of exchanges between criminal CFO/forensic accounting sleuth Sam Antar and Overstock.com CEO Patrick Byrne. Sam being Sam, he recently reached out to Patrick Byrne to see if he would be interested in a mea culpa:

From: Sam E. Antar
Sent: Monday, March 08, 2010 11:02 PM
To: Patrick M. Byrne
Subject: Overstock.com Restatement
Importance: High

Hi Patrick:

Will you finally admit that I was correct when I reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement?

You owe me a public apology.

Regards,

Sam


Our understanding is that Pat hasn’t responded to Sam’s request for an apology yet (we’re hopeful!) so Team GC thought we’d offer some suggestions to Dr Byrne should he decide to take the high road and apologize to Sam. Having been in this situation more than once myself, I can honestly say sometimes you’ve just got to suck it up, buy some flowers, and admit that you’re an ass but totally repentant.

Overstock.com gift cards – Nothing says I’m sorry like free stuff that the aggrieved party can pick themselves. Bonus, the overhead on Byrne’s own inventory must be low. You know, because it’s his, not because there is any monkey business going down on OSTK’s financials.

An SEC Gift Shop Goodie BasketI busted Sam in an SEC baseball hat at Stanford last week so wouldn’t it be cute if Byrne got him a whole basket full of fun regulatory shwag? Awww, what a precious moment it would be watching Sam pull out DoJ beer cozies and a color-changing SIGTARP coffee mug. Who doesn’t love tchotchkes? PB can’t go wrong! I’d even throw in a pair of NY Fed Pistol Team patches for that added touch of flair.

Cupcakes – Come on, no one can resist cupcakes, not even Sam E. Antar’s hardened criminal ass. You know, might as well send some to the GCHQ while he’s at it, we’ve been putting up with this Overstock shit for months too. Hopefully even Patrick Byrne knows when it comes to cupcakes, it’s best to invest in high quality, over-priced boutique cupcakes. Even my cheap ass knows that.

Earlier:
Winners and Losers in the Overstock Restatement
Even Earlier:
Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?

Accounting Has Finally Broken into the Hitler Meme

Since the Times ran a story on this cultural trend in fall of 2008, and the following video was posted in December ’09, you might say that accountants are again, late to the party but whatevs. And of course it’s an IFRS spin.


While somewhat humorous, it’s still based on a Canadian company and there’s no mention of Sir David Tweedie, which we think is an unforgivable oversight. That being said, it is encouraging that there is at least one Downfall remake out there that encompasses accounting. Personally, we’d like to see some of the following topics addressed using the clip:

• Patrick Byrne getting the news that Overstock has to restate their financial statements, again.

• Tim Flynn learning that the KPMG Salt Lake City office actually accepted the Overstock audit engagement.

• Stephen Chipman receiving word that Grant Thornton was fired from the Koss engagement because VP Sue Sachdeva made off with $31 million and it was discovered by American Express.

• Barry Salzberg finding out that Deloitte only ranked 70th in the Fortune 100 (behind E&Y and P&M) after being #1 on the BusinessWeek list.

We’re sure there are other possibilities. We encourage you to get to work on this ASAP.

Winners and Losers in the Overstock Restatement

With Overstock.com announcing last week that they would be restating their financial statements for the the last three quarters and their 2008 consolidated financial statements, it marked another open-mouth-insert-foot moment for Patrick Byrne and his Company.

This will be the third restatement in the last three years. We understand that financial reporting can be tricky but this doesn’t make for a very good pattern.

Winners:

Steve Cohen, Michael Milliken, Sam Antar, Joe Nocera, Gary Weiss, Roddy Boyd, Barry Ritholtz, Felix Salmon, Henry Blodget, John Carney, Joe Wisenthal, et al. – Anyone and everyone vilified by Patrick Byrne because they questioned either him, his Company, or both. Patrick Byrne has always maintained that these people were part of large conspiracy of short sellers and financial bloggers and journalists. The restatement simply proves that whatever suspicions they had about Overstock, they were right. Plus all their friends and family on Facebook were violated by creepazoid and Deep Capture hatchet-man, Judd Bagley. That’s just not cool.


Grant Thornton – Not sure if GT realized it at the time, but getting fired by Overstock is looking pretty good right now. So they changed their minds on the accounting; BFD, right? It happens and clients typically get over it. Pat Byrne decided that it was unacceptable and that LOUDLY crucifying GT in SEC filings, the press, and on conference calls would convince everyone that the auditors were idiots and Overstock and he would triumph over this injustice. Grant Thornton did not hesitate in chanting “liar, liar pants on fire” to Patsy’s face (nothing to lose, they were already fired) and now they’re clear of this three ring circus.

Losers:

PricewaterhouseCoopers – PwC was the auditor for Overstoc prior to Grant Thornton and had always signed off on the company’s financial statements (excellent service in PB’s mind). Now that the restatement has occurred, PwC gets dragged back into the fray to explain what they did, why they did it, and how they got it wrong. A) That just sucks and B) who the hell is going to remember what the hell they did four years ago?

Overstock shareholders – Any Company that restates their financial statements with any regularity whatsoever should be avoided like a group of lepers. If you’re still currently long in Overstock, you have the chance to make the right the decision: sell while the shares are worth something. Your humble servant Patrick Byrne has failed you.

Jury is out:

KPMG: For some reason, Klyneveld Salt Lake City decided that despite Overstock’s dubious past, they were willing to roll the dice. The firm now has the pleasure of guiding the firm through this restatement and somehow pulling the audit for fiscal year 2009 together. The whole exercise reeks of futility. Anyone that happened to be assigned to this engagement and a shred of sanity would have given their notice on the spot. For the time being, the firm seems to be sticking it out but time will tell if the firm changes their mind about their risky new client.

SEC: Everyone knows that the Commission doesn’t have the best track record of late. They have managed to be the laughingstock of the entire bureaucracy and despite a lot of huffing and puffing about new divisions and putting together a dream team of enforcement and financial experts, we haven’t seen much for results. Overstock may be a chance to show everyone that they’re done taking shit and that they are going to start smacking companies around.

Quote of the Day: He’s Also Good at Stalking | 02.03.10

“I suspect he takes much more pleasure in baiting opponents than he does in running a company. The evidence he is good at baiting is much clearer than the evidence he is good at managing.”

~ Floyd Norris, New York Times Columnist on the Farmville obsessed, Segway Cowboy Patrick Byrne.

Quote of the Day | 01.21.10

“But Byrne is evil. I’ll stand by that. More than evil, he’s soul-less evil. That said, I hope you understand that I don’t have anything against Byrne per se. I have things I want, and he stands in the way, so I now I’m removing him. At the same time, there’s no reason we can’t co-exist under specific circumstances.
~ William K. Wolfrum, on Farmville junkie and Overstock.com CEO Patrick Byrne.

Nasty CEO Patrick Byrne; Blogging Is a Good Idea; Against Tax Breaks for Haiti Relief

America’s Nastiest CEO [The Big Money via Gary Weiss]
We’re still wondering if the KPMG Salt Lake City office knows what they got themselves into by taking Overstock.com on as a client.
Gary Weiss notes:

The Big Money this afternoon came out with a devastating (and gutsy) article by former Fortune writer Roddy Boyd on the corporate crime petri dish that is Overstock.com, and its nuts CEO Patrick Byrne. The title is “America’s Nastiest CEO,” and it descristematically harassed and attacked critics to cover up his own incompetence and wrongdoing–stuff that actually is a lot worse than has previously been acknowledged.

Calling all Manchester United fans [AccMan]
Dennis Howlett — never shy with his opinion — segues into an argument for blogging after noting that the Manchester United don’t need to:

There is a blog post over on Social Media Today that demonstrates as well as just about anything I’ve seen written why you should almost never listen to folk who call themselves ‘social media experts/gurus/consultants.’ Awarding itself the grand title: World’s Most Valuable Soccer Team Doesn’t Get Social Media the author proceeds to show almost zero understanding of The Beautiful Game or the people who are part of that world.


After blowing up one person’s argument for social media, DH turns the tables back to why it’s a good idea:

I have for the longest time said that professionals should write blogs. Many seem bemused by the question: we’re too busy, what would we say? we don’t want to blatantly promote, we’re not sure clients would care…the list goes on. Many talk about networking and the need for face to face meetings in order to make the kind of marketing impression they believe will win business.

In case you still think that the traditional networking is still more your speed, DH continues:

Unlike football fans, clients don’t congregate in large numbers every Saturday afternoon although they may do so in smaller numbers in industry specific associations from time to time. And of course you should be making an effort to attend those kinds of event. But in the meantime and if you are serious about running a business as opposed to a practice, then surely it makes sense to stand alongside your clients?

Have you run out of excuses for your firm having a blog?
Don’t Give Special Tax Breaks for Haiti Relief [Tax Vox]
Before everyone gets excited about the possibility of your contributions to the Red Cross, Doctors without Borders, et al. being deductible for 2009, don’t forget that many of you won’t benefit from a tax standpoint:

The proposal won’t help the two-thirds of taxpayers who take the standard deduction since it only accelerates itemized deductions. Even among itemizers, those millions of givers who are contributing $10 by text message are not going to care much about whether they can write off those few dollars this year or next.
Those who might benefit–relatively high-earning itemizers who give substantial gifts–can easily address this cash flow problem under current law. All they’d need to do is change their withholding or estimated tax payments to reflect any unusually large gifts to Haiti relief.

And not only that, what about other charities that are not subject to the timing change? Don’t they still need money?

Btw, a 2008 paper by Jon Bakija and Bradley Heim finds that higher-income taxpayers are more likely to adjust their giving to reflect changes in their after-tax cost–another reason they’d be the biggest beneficiaries of this bill. But even for them, this small temporary timing change is not likely to matter very much.
Still, some people would change their behavior, and that troubles me. Will they reduce gifts to other worthy causes in favor of newly tax-favored Haiti-related charities? Many organizations are already struggling with major recession-driven reductions in contributions and this would hurt even more.

Haiti still needs everyone’s help, no question but don’t be shocked if Congress’ latest attempt at helping out doesn’t turn out to be that helpful.

KPMG Rolls the Dice, Will be the Next Auditor of Overstock.com

Thumbnail image for 200px-KPMG.svg.pngBut you already knew that was going to be the case. Back when we asked you to vote on which firm would be the next firm fired engaged by Overstock, over 42% of you said it would be KPMG.

This news comes despite reservations expressed by at least one reader who, at the time, had this commenlockquote>I for one think it is sad that such a high percentage of survey responders think KPMG will pick up OSTK. I hope from a public opinion and liability standpoint that KPMG will resist the urge to add yet another high risk client to its listing and cause further damage its reputation.

Sorry, dear reader but apparently the high profile cat fight between the company and Grant Thornton wasn’t enough to scare KPMG off. Not even the very public revelation of Patsy’s creepy-ass stalking of Overstock critics in the financial media and blogosphere caused the KPMG partners in SLC to turn this client down.

Oh, and not to mention a management team who thought that filing unreviewed 10-Q was the best course of action. But as white-collar crime expert (and self-proclaimed crook) Sam Antar told us:

KPMG is taking a client with no management integrity and is well advised to study SAS No. 99 about “Consideration of Fraud in a Financial Statement Audit” regarding the unethical “tone at the top” set by Overstock.com’s unprincipled management team. Every single initial financial report for every reporting period issued by Overstock.com has failed to comply with GAAP and other SEC disclosure rules since the company’s inception. Overstock.com has restated its financial reports two times in the last three years and now is trying to avoid a third restatement of financial reports resulting from its improper use of “cookie jar” reserves to inflate its financial performance from Q4 2008 to Q3 2009.

In case you’re not convinced of management’s shadiness, Sam also pointed out that they intended to wait for the current SEC inquiry to be resolved prior to choosing a new auditor:

Patrick Byrne and Jonathan Johnson went back on their promise that they would not shop for an audit opinion. Both Byrne and Johnson previously told investors that Overstock.com would wait until after the SEC Division of Corporation Finance completed its review of the company’s financial disclosures.

We looked at the transcript of the conference call and here’s what we found (a link to the entire transcript is below):

Willis TaylorGagnon Securities – Analyst

Since you’ve dismissed your auditor for a very specific accounting choice, when you go to select a new auditor, how do you prevent yourself from being accused of opinion shopping?

Jonathan JohnsonOverstock.com – President
That’s a great question, Louis, and that’s part of the reason that we’ve decided not to select a new auditor until this — until we resolve this issue with the SEC. We do not want to be accused of opinion shopping. We’d like the SEC to help us figure out — we’d like them to say we’ve done it the right way or we’ve done it the wrong way. Once they say one of those two, we don’t need to opinion shop.

Patrick ByrneOverstock.com – Chairman and CEO
But, so, I would even say to the point that when people have contacted us, we have discouraged any communication on the grounds that we got — for just that reason — well, I have the — no matter who we talk to now, then whoever we ultimately pick, people are going to say, well, you did this because you opinion shop.
So we’re really not having discussions with anybody. It’s nice to get phone calls, but we’re not talking to anybody until we get through this just to prevent — just as a prophylactic measure.

From the sounds of it, Overstock was beating off firms with a stick, so the pressure must have gotten to company’s audit committee to pick a new firm prior to the SEC wrapping up its little inquiry. So can we assume that since the SEC hasn’t told them yay or nay on their accounting, they ARE opinion shopping?

And so the winner (read: next to be dismissed) is KPMG, who not only has to throw together an audit for 2009, they have to re-issue 10-Qs for the last three quarters. Who in SLC is giving up sleep for the next four months?

Here is the Overstock press release (we emphasized some good parts) which is not shy about slamming Grant Thornton or that the SEC isn’t finished with its inquiry:

Overstock.com, Inc. (Nasdaq: OSTK) today announced that its Audit Committee engaged KPMG as the company’s independent registered public accounting firm of record for the fiscal year ending December 31, 2009. KPMG will conduct an integrated audit of the company’s 2009 financial statements, including review of the company’s quarterly information for the periods ending March 31, 2009, June 30, 2009 and September 30, 2009.

It is nice to be back with a Big Four accounting firm,” said Jonathan Johnson, President of Overstock.com. “We are pleased to have the resources and professionalism that KPMG brings as our auditors. We will work closely with them to timely file our 2009 Form 10-K. In the meantime, we remain in discussions with the SEC to answer the staff’s questions on the accounting matters that lead to our filing an unreviewed Form 10-Q for Q3.”

Overstock.com’s Audit Committee dismissed Grant Thornton, its previous auditors, in November when Grant Thornton advised the company that they had revised their position on how the company should have recorded a $785,000 asset in 2008, and, that as a result of this revised accounting position, Grant Thornton would be unable to complete their review of the company’s Q3 2009 financial statements unless the company amended its previous 2009 quarterly filings and restated our 2008 financial results.

We wanted to get KPMG’s thoughts on this but our emails have gone unreturned at this time. If you’re in the know, definitely get in touch with us about anything related to the latest twist to this story.

OSTK_Transcript.pdf

Will a Boycott of Overstock.com Thwart Patrick Byrne’s Auditor Hunt?

Thumbnail image for patsy_byrne.jpgGuys and gals, we here at GC are concerned about something. Something other than who the next face of Accenture will be (honestly we’re excited about Chuck’s commanding lead).
No, we’re concerned that your humble servant and Farmville enthusiast Patrick Byrne is going to be unable to find an auditor for Overstock.com. The company has until January 18th to pull something together so the NASDAQ doesn’t delist them and if things continue the way they are, it’s going to be hello Pink Sheets.
Maybe things wouldn’t look so grim if PB hadn’t blown off CNN. Or if he hadn’t pissed off every single financial journalist and blogger by getting too friendy.
But now that Barry Ritholtz has called for a boycott, any hope for finding the next auditor to put the stamp of approval on OSTK’s financial statements is fading.
Wait! Gary Weiss has his doubts: “As for that boycott: great idea, except that with Byrne manipulating the financials, how would you know if it is having any impact?”
Whew! There’s still a glimmer.
Boycott Overstock.com [The Big Picture]

Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?

Thumbnail image for farmvillePat.jpgWe haven’t really touched on the Patrick Byrne’s ill-fated attempt to stalk his critics (and all their friends, acquaintances, and complete strangers) mostly because we weren’t on the list and those that were (including Gary Weiss, Sam Antar, Joe Wiesenthal, and Barry Ritholtz) are doing a fine job of pointing out how desperate, shady, and just plain fucking bad this makes Patsy, his head minion at DeepCapture Judd Bagley, and Overstock look.
We only bring it up now because we’d like to point out that it’s worth speculating on the other side of this story. Our contention is that P. Byrne, being of questionable mind and maturity, is OBSESSED with Farmville and it is his personal mission to destroy the Farmvilles of his critics and their FB friends (now who’s movin’ up in Farmville, bitches?).
This agonizing torture method will eventually wear down the haters to the point to where no one will be able to take the man, his doomed-to-fail quest to locate an auditor, and his company seriously and will thus give up their quest of destroying him.
The only other thing we can come up with is that he has an intense hatred of trite status updates and was going to expose everyone for their lack of substantive commentary but we find all his critics to be interesting bloggers, so we tossed that theory.
Grant Thornton and PwC have got to feel pret-tay good about how this all turned out. If you’ve got you own theories or thoughts on this situation, feel free to discuss them here.

Preliminary Analytics | 12.10.09

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for 140px-United_States_Securities_and_Exchange_Commission.pngSEC’s Khuzami ‘Skeptical’ of Auditors’ Claims on Privilege – Privlege shmivlege. [FEI Financial Reporting Blog]
Obama Proposes $12,000 “Cash for Caulkers” Program – Including the most immature montage ever. [TaxProf Blog]
Overstock.com and Patrick Byrne Have an Enemies List That Includes Friends and Family Members of Critics – Using Facebook no less. Anyone surprised? [Sam Antar/White Collar Fraud]
Madoff Auditor Plea May Signal Other Probe – Tax charges thrown in with David Friehling’s guilty plea may indicate that prosecutors may be building a case against other Friehling clients including the Madoff sons. [WSJ]
Broadcom Co-Founder Cleared in Backdating Probe – “U.S. District Judge Cormac J. Carney made the announcement after Samueli, owner of the NHL’s Anaheim Ducks, spent two days testifying for the defense in the fraud trial of a former executive for the telecommunications chip maker. ”You have restored my faith in the criminal justice system,” an exhilarated Samueli told the judge in federal court in Santa Ana.” Avoiding prison will do that. [AP via NYT]

Patrick Byrne May Say Something That Will Antagonize You

Thumbnail image for patsy_byrne.jpgThe Patrick Byrne Express (via Segway, natch) pulled over from its nationwide auditor search to pen the latest triumph in his quest to refute every Overstock/Patrick Byrne hater on the planet.
Patsy’s latest letter informs us of the settlement that Overstock has reached with Rocker Partners, one of those short-selling hedge fund haters, for $5 million.
His masterpiece opens with “The good guys won” and then rambles on to tell us how he feels about pretty much everyone in financial media. And that’s what this was really all about. It wasn’t about the money, you fools. This was about exposing the anti-Overstock/Patrick Byrne contingent:

What is of vastly greater significance than this $5 million payment, however, is an examination of the cover-up conducted by elements of the New York financial press. Taking the lead was CNBC, which spent a great deal of airtime downplaying the significance of this suit, vilifying me, and smearing Overstock.

Apparently, this is just the beginning. Prime brokers, sounds like you’re next.
And just so you know, PB and his company don’t give a damn if you, the SEC, or anyone else for that matter gets bent out of shape about them spreading the truth. As Floyd Norris rehashes some of the trubs going on in casa de Overstock, he notes this little treasure from the company’s unreviewed 10-Q:

Public statements we or our chief executive officer, Patrick M. Byrne, have made or may make in the future may antagonize regulatory officials or others.
We and our chief executive officer, Patrick M. Byrne, have from time to time made public statements regarding our or his beliefs about matters of public interest, including statements regarding naked short selling. Some of those public statements have been critical of the Securities and Exchange Commission and other regulatory agencies. These public statements may have consequences for us, whether as a result of increased regulatory scrutiny or otherwise.

Sounds like fighting words to us. Go ahead and bring it, SEC. Patrick Byrne will be waiting.
Overstock Claims Victory [Floyd Norris/NYT]

Patrick Byrne Misses Golden Opportunity to Solicit Potential Auditors

Thumbnail image for patsy_byrne.jpgJust when we thought the hubbub around shareholder servant Patrick Byrne had gone on hiatus, we came across a post from Gary Weiss telling us that Patsy bailed on a CNN appearance for State of the Union with John King.
According to the website, “Patrick Byrne, Chairman & CEO of Overstock.com, looks at how consumer spending will fare this holiday season during a global recession.”


As Weiss notes:

Seriously, though, CNN’s bookers had no choice. What other CEO of any retail outlet bigger than a pushcart would be available during the busiest retailing weekend of the year? Byrne was scheduled to appear from studios in San Francisco, not Salt Lake City, where the corporate headquarters is located.
Here he was, while his company teetered on ruin, either flying into San Francisco for the chance to get his puss on national TV, or living it up on Telegraph Hill or wherever, far from his beleaguered and SEC-investigated company.

Apparently Byrne was late and dropped from the show. There is no transcript available for his appearance but if his smiling mug (hopefully posing on a Segway) made an appearance, by all means let us know.
In all likelihood, he was on the hunt for Friehling & Horowtiz’s San Fran office but an open plea on national television seems like a better way to find his company’s next auditor. Oh well. Next time!
“Economic Expert” Patrick Byrne Dumped by CNN [Gary Weiss]
More GC Coverage of Patrick Byrne/Grant Thornton saga:
Patrick Byrne: Noooo, Grant Thornton, You’re Lying
Grant Thornton: Patrick Byrne’s Pants Are on Fire

Patrick Byrne: Noooo, Grant Thornton, You’re Lying

Thumbnail image for patsy_byrne.jpgOkay you guys, this Overstock.com/Grant Thornton cat fight is getting real mature.
Your humble servant Patrick Byrne has responded to Grant Thornton’s letter stating, in no uncertain terms that he is a L – I – A – R by saying, “I know you are but whatami? I know you are but whatami? I know you are but whatami?”
In the latest OSTK press release, Patsy lists nine points of contention that he has with Grant Thornton’s letter to the SEC which started all this “You’re a liar!” business. We’ve presented some of our favorite moments after the jump for your enjoyment (all emphasis is ours):

4. Grant Thornton Letter: “Further, paragraph 4 references a report on the Company’s consolidated financial statements for the year ending December 31, 2009. As we have not performed an audit of the Company’s financial statements for any period, this reference is incorrect.”
We know that Grant Thornton never performed an audit of our 2009 financial statements and, again, we never said otherwise: as it is currently November, 2009, our 2009 financial statements do not exist. The SEC requirement is that we disclose what Grant Thornton would have disagreed with had it performed what our audit committee engaged them to do – an audit of our 2009 financial statements. We complied with the SEC requirement. I’m not sure what Grant Thornton expected us to say in prefacing the explanation of our disagreements with Grant Thornton.

6. Grant Thornton Letter: “We disagree with the Company’s statement in paragraph 7 ‘that upon further consultation and review within the firm, Grant Thornton revised its earlier position’ regarding the previously filed 2009 interim financial statements. This statement is not accurate. The Company brought the overpayment to a fulfillment partner to Grant Thornton’s attention in October. After additional discussions with the Company, the predecessor auditor and receipt of additional documentation from the Company we determined that the Company’s position as to the accounting treatment for the overpayment to a fulfillment partner was in error.”
This is a falsehood. On several occasions Grant Thornton discussed with and provided guidance on the accounting for the $785,000 fulfillment partner overpayment during and prior to October…
7. Grant Thornton Letter: “Further the Company’s statement does not address the fact that the consultation noted in paragraph 5 was in relation to the ongoing incomplete review of the September 30, 2009 interim financial statements.”
This is a curious statement given that on October 30 Grant Thornton sent a final report dated November 5 (for a November 6 audit committee meeting) to our audit committee stating that “[w]e have concluded our review of the most recent interim quarter. Our review procedures identified certain immaterial differences,” all of which “are currently being addressed by management or will naturally be corrected by year-end.” These immaterial differences amounted to a net $35,000 for the first nine months of 2009.
8. Grant Thornton Letter: “We have also read Item 4.02 of Form 8-K of Overstock.com, Inc. (‘the Company’) dated November 16, 2009 and disagree with the statements concerning our Firm contained therein. During the course of our incomplete review of the Company’s September 30, 2009 financial statements, we advised the Company that disclosure should be made to prevent future reliance on its March 31, 2009 and June 30, 2009 financial statements. We advised the company [sic] to make the disclosure because we became aware that material modifications should be made to the previously filed 2009 interim financial statements to conform with US GAAP.”
This is incorrect. As noted above, on October 30, Grant Thornton sent a report to our audit committee stating that “[w]e have concluded our review of the most recent interim quarter,” and nowhere in its October 30 report is there any advice from Grant Thornton that we should make disclosure to prevent future reliance on our Q1 or Q2 2009 financial statements. Such an omission from such a report seems conclusive of the fact that this was not an issue until our audit committee dismissed Grant Thornton. In addition, on November 13 – after our audit committee dismissed Grant Thornton – our Senior Vice President, Finance specifically asked Mr. Haycock (the managing partner of the Grant Thornton Salt Lake office) whether Grant Thornton had communicated to our audit committee that we should take actions or make disclosures concerning our Q1 and Q2 2009 financial statements, and we noted that any such communications would trigger a Form 8-K filing requirement for us. Mr. Haycock answered that Grant Thornton had not made any such communications. Grant Thornton only gave us such advice later on November 13 in a letter to the chairwoman of our audit committee.

Byrne wraps it up this way, naturally:

As I said in my November 16 letter, our finance and legal teams continue to work with the SEC on the issues addressed in its comment letters, and once these issues are resolved (and we have engaged another independent audit firm), we will file a reviewed Q3 Form 10-Q/A.
Your humble servant,
Patrick M. Byrne

Oh yeah, did we mention they’re still looking for an auditor? Shockingly, there are still no takers.
The final numbers from our poll show that KPMG is the winner of auditor most likely to be fired next by Overstock.com. We’re still waiting to hear who’s actually entertaining the idea of sabotaging their own firm with this little treat of a company. Stay tuned.
GC Coverage of Overstock.com/Grant Thornton:
Grant Thornton: Patrick Byrne’s Pants Are on Fire
Overstock.com Receives Delisting Notice, Really, Really, Really Needs an Auditor
Overstock.com Fires Grant Thornton, Files Unreviewed 10-Q, CEO Remains Humble
Also see: Overstock: Actually, Grant Thornton Is Lying [Silicon Alley Insider]

Grant Thornton: Patrick Byrne’s Pants Are on Fire

patsy_byrne.jpgWant more twists out of the asylum known as Overstock.com? You got it.
Overstock.com filed an amended 8-K yesterday — after the markets closed — that included a letter from GT to the SEC. The letter, in so many words, says that OSTK lied about GT’s knowledge about the hocus-pocus accounting irdinary, every day case of client and auditor going their separate ways, the auditors letter would basically say, “Yeah, we’re cool and we’re moving on.”
But in this case, since we’re dealing with Patrick “I’ll open this letter with Nietzsche” Byrne, we’ve got an auditor saying, “Um, yes, this is what happened. In CRAZY TOWN.”


To wit (our emphasis):

We disagree with the Company’s statement in paragraph 7 “that upon further consultation and review within the firm, Grant Thornton revised its earlier position” regarding the previously filed 2009 interim financial statements. This statement is not accurate. The Company brought the overpayment to a fulfillment partner to Grant Thornton’s attention in October. After additional discussions with the Company, the predecessor auditor and receipt of additional documentation from the Company we determined that the Company’s position as to the accounting treatment for the overpayment to a fulfillment partner was in error. Further the Company’s statement does not address the fact that the consultation noted in paragraph 5 was in relation to the ongoing incomplete review of the September 30, 2009 interim financial statements.

Hang in there, GT isn’t done:

We have also read Item 4.02 of Form 8-K of Overstock.com, Inc. (“the Company”) dated November 16, 2009 and disagree with the statements concerning our Firm contained therein. During the course of our incomplete review of the Company’s September 30, 2009 financial statements, we advised the Company that disclosure should be made to prevent future reliance on its March 31, 2009 and June 30, 2009 financial statements. We advised the company to make the disclosure because we became aware that material modifications should be made to the previously filed 2009 interim financial statements to conform with US GAAP. Such modifications are necessary due to the Company having reduced its cost of goods sold in the first quarter of 2009 by receipt of a refund of an overpayment to a fulfillment partner.

There you have it. Grant Thornton, in extremely diplomatic manner, is calling Patrick Byrne and Overstock.com liars.
Now after considering both the humble servant’s story and GT’s letter, our instinct tells us to go with GT. Obviously we’re partial to the servants of the capital markets but the other mitigating factor is, let’s see, Patrick Byrne is off his rocker.
Undiagnosed mental conditions aside, we wish we could give GT more credit for calling BS on a slimy client. Fact of the matter is, they were warned by Sam Antar back in March — when they took OSTK on as a client — that they were in for trouble:

I wish that I can wish you luck with your new client. However, I cannot wish you luck because you apparently ignored the basic “smell test” in evaluating Overstock.com as a potential client.

Apparently Grant Thornton, like your predecessor, PricewaterhouseCoopers, did not carefully examine false claims about Overstock.com’s financial performance, dating back almost ten years by CEO Patrick Byrne. You would have discovered that Byrne has no problem habitually lying to the investors, the news media and the public.

So as you can see, this is all very awk. In GT’s case, they were explicitly warned to stay the hell away from OSTK. And any auditor worth their salt would take one look at this company and get a feeling like their body was covered in centipedes.
As for Patsy and OSTK, well, as Gary Weiss notes, “Overstock will be tossed onto the pink sheet ant hill where it really, seriously folks, really belongs.” Indeed.
We asked for a show of hands yesterday on who you thought would roll the dice with Pat and Co. and so far KPMG has the lead which seems a tad ludicrous. But hey! We’re not one to argue with the voice of the people.
Voting remains open until the end of today, so check out the latest tally and throw support behind the next firm to get tangled in the Patrick Byrne web. We’ll continue to update you on this horror show as it develops.
Open Letter to the Securities and Exchange Commission Part 3: Overstock.com Lied About Grant Thornton and Concealed Error [White Collar Fraud/Sam Antar]
Grant Thornton to SEC: Overstock.com Lied [Gary Weiss]
Also see: The Auditor Disagrees With Overstock.com [Floyd Norris/NYT]
Overstock’s Fired Accounting Firm Says Overstock Is Lying [Silicon Alley Insider]

Overstock.com Receives Delisting Notice, Really, Really, Really Needs an Auditor

patrick_byrne.jpgJust a brief follow-up on the three ring circus known as Overstock.com. After Wednesday’s bizarro conference call, Ringmaster Patrick Byrne and his company filed an 8-K on Friday letting the SEC know that the NASDAQ wasn’t impressed with the unreviewed 10-Q that the company filed last week.
The NASDAQ notice informed OSTK that since the company thought it would be cute to file an unreviewed 10-Q, they will delist the OSTK from the exchange if they are not back in compliance with listing rules by January 18th.
It was an especially nice touch that OSTK filed the 8-K “two minutes after market close today, a day after the letter was received.”
Getting back into compliance will involve finding an auditing firm stupid enough desperate enough willing to be the next humble servant to sign off on the 10-Q.
The issue at hand is worth putting to a vote. For whatever reason you like, choose the firm that should be the next auditor of OSTK. We’re not privy to all the possible independence issues that may exist, so anyone that brings them up to point how one firm would be disqualified can piss off.