Overstock.com Director James V. Joyce Bolts, Receives Huge Questionable Exit Payment

Apr. 2.09 | About: Overstock.com, Inc. (OSTK)

After Wednesday's stock market closed, Overstock.com (NASDAQ: OSTK) announced the resignation of James V. Joyce from its Board of Directors. However, Overstock.com's press release made no reference to a $1,250,000 payment for the termination of consulting services to Icent LLC, a management consulting company headed by Mr. Joyce. Overstock.com left investors the mundane task of finding out about the $1,250,000 termination payment by disclosing it in a separate SEC filing. See below:

Overstock.com press release:

SALT LAKE CITY, April 1 /PRNewswire-FirstCall/ -- Overstock.com, Inc. (Nasdaq: OSTK) today announced that James V. Joyce has resigned from the Board of Directors of Overstock.com. Chairman and CEO Patrick Byrne said, "James' consulting engagement has been concluded with his customary extraordinary results. James' advice has been of tremendous value to me, the board, and the company for years, but especially over the last two years of getting the company back on the rails. I am deeply in his debt." Mr. Joyce had been a director since January 2008.

Note: Bold print and italics added by me.

Separate Overstock.com 8-K report filed with the SEC:

On April 1, 2009 Mr. James V. Joyce resigned from his position as a member of the Board of Directors of Overstock.com, Inc. (the “Company”). Mr. Joyce’s resignation is not the result of a disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Joyce and the Company are concurrently ending the Company’s consulting arrangement with Icent LLC, which is a management consulting company of which Mr. Joyce is the chief executive officer, and through which Mr. Joyce has provided consulting services to the Company. In connection with the termination of the consulting arrangement, the Company has agreed to pay $1,250,000 to Mr. Joyce.

Note: Bold print and italics added by me.

On January 14, 2008, James Joyce replaced former company President Jason C. Lindsey on Overstock.com's Board of Directors after Lindsey resigned from both posts (President and Board Member) at the company. Jason Lindsey's resignation letter was dated December 31, 2007. However, in a separate sworn declaration filed in connection with a court proceeding, Lindsey said he resigned on January 2, 2008. In addition, a revolving line of credit note dated January 1, 2008 still listed Lindsey as a person "authorized to request advances" despite his claimed resignation as President of Overstock.com, a day earlier. Apparently, Lindsey's backdated his resignation.

Overstock.com's $1,250,000 contract termination payment to former Board member James Joyce is over five times the sum of $225,000 in consulting services "authorized to be paid to Mr. Joyce for services rendered to the Company during 2007." The company has not disclosed additional amounts in consulting services paid to Mr. Joyce in 2008 or 2009 to-date, aside from the termination fee.

See Overstock.com 8-K SEC filing dated January 14, 2008 below:

On January 14, 2008 the Board of Directors of Overstock.com, Inc. (the “Company”) appointed James V. Joyce to the Board of Directors. Mr. Joyce has served as a consultant to the Company since September 2005. The aggregate amount the Company has paid to Mr. Joyce since January 1, 2007 is $615,000 (including $225,000 authorized to be paid to Mr. Joyce for services rendered to the Company during 2007). The Company has previously granted Mr. Joyce options to acquire 40,000 shares of the Company’s common stock at a weighted average exercise price of $30.38 per share. In connection with the restricted stock unit grants described below, on January 14, 2008 the Company also granted Mr. Joyce restricted stock units to acquire 15,000 shares of the Company’s common stock under the Company’s 2005 Equity Incentive Plan and entered into or will enter into a Restricted Stock Unit Grant Notice and Restricted Stock Agreement with Mr. Joyce in substantially the form filed herewith as Exhibit 10.1. A copy of the press release issued by the Company on January 14, 2008 is attached hereto as Exhibit 99.1 and is incorporated by reference.

A shrewd person posting on the Yahoo (NASDAQ:YHOO) message board noted:

And another thing - why does a retailer that's been in business a decade need "management" consulting services (rhetorical question, I know the answer)? What aspect of "management" was Mr. Joyce consulting on?

How many FTE's were consulting under Joyce's banner that would require a contractual payout of a whopping 1.25 million? How many man hours does that payout represent?

Let's see, the avg cost of a non top-tier name "management consultant" has gotta be billed at around $150/hr or so these days.

Sooooooo, that's a payoff of over 8,000 man hours.

Ok hec, let's say Joyce was worth every penny of $500/hr - that's a payout of 2,500 man hours. Under most standard per-diem consulting contracts, the contracting company only has to provide 2-weeks termination warning or forfeit 2 weeks of billings. Let's see...80 hours of billable hours at the fantastic rate of $500/hr = $40,000.

Ok longs - speak up - is THIS the kind of shareholder equity stewardship you are expecting from Patrick Byrne?

Stinky, stinky

Why has Overstock.com paid James Joyce such a huge sum to terminate his consulting agreement? Masquerading stock market reformer Patrick Byrne has claimed that he has "gold standard in communicating with candor” Overstock.com’s results. However, Overstock.com left out any mention of such a huge payment in its press release, leaving investors the mundane task of digging through SEC filings to obtain information about the contract termination payment.

Overstock.com CEO Patrick Byrne once said:

In our public SEC filings we chose principles at the conservative edge of GAAP….

Note: Bold print and italics added by me.

However, Overstock.com violated GAAP in just about every financial report since inception (Details here, here, and here).

Disclosure: I have no position in Overstock.com securities, long or short.