For the past few years, Vistaprint (VPRT) has been a controversial name amongst investors. On one hand you have a printing servicing company that provides printed products to small business at an affordable price. But on the other hand, you have a company which derives a large portion of its income from “referral fees” – from web loyalty shopping clubs, or in layman terms, those $14.95 a month charges on your credit card bill that leave you scratching your head.

Americans know that they have a responsibility to live within their means and pay what they owe. But they also have a right to not get ripped off by the sudden rate hikes, unfair penalties, and hidden fees. President Barack Obama (May 10, 2009)

Citron exposes the only publicly traded “Installment Loan” Company as a potential ZERO!!

On Wednesday IBOC announced a “strong quarter” in a Press Release that came out right in the middle of a strong day for the market without any prior notice. If you were looking for the conference call…look again. They seem to be the only public bank in their region that will not talk to investors. If you were looking for a balance sheet….look again. They are the only bank in their region who gives you just a headline without a balance sheet in the PR. Instead, management offers the blanket statement, “We are confident in the strength of our balance sheet and especially the quality of our loan portfolio”

Come on Down …. and get Acquainted with New Oriental Education and Technology Group (NYSE:EDU)

Loans on the Books

Citron believes there are many headwinds facing the company including:

Life Partners (LPHI) is a viatical/life insurance settlement provider based in Waco, Texas. LPHI acts as dealmaker – it arranges for buyouts of life insurance policies in cases where the death of the policyholder can be anticipated within a finite timespan. It earns fees by connecting these potential settlors with investors, who agree to front the money and pay the premiums, in exchange for rights to the policy benefit face amount, which is received following the settlor’s subsequent death. Clients are mostly individuals who are referred to Life Partners through financial planners, lawyers, insurance agents and CPA’s.

It is the belief of Citron that this company has too many red flags that investors are advised to consider carefully:

It seems like just another piece of every day litigation. According to the Q:

“If You Add to The Truth, You Subtract From It”
- The Talmud

It is no secret that Citron Research is skeptical of American Superconductor (AMSC). The company has now crossed the line to ridiculous. They have taken a small customer in Sinovel and added so much nonsense that they have subtracted any corporate credibility that is still left from a company that has done nothing but burn through investors money. It is our opinion that anyone on Wall Street would have to be deaf, dumb and blind not to realize the complete lunacy of American Superconductor’s most recent press release.

Citron seeks to answer a key question: Was this increase in revenue gained through legitimate arms-length transactions, or was there another explanation - some undisclosed related party transactions? You be the judge. If we look to the insiders for guidance, they have already rendered their verdict, in the form of insider selling at a furious pace. Read on and enjoy a true tale of Wall St.

Something is rotten in the state of Denmark - William Shakespeare

Last week Arthrocare announced its quarterly results. They led with a PR touting surprisingly high year-over-year growth numbers. Notably, the announcement was in the form of an 8-K – only including the numbers the company wanted investors to see. All the financial details provided by a 10-Q, such as divisional breakout of revenues, cash flow, receivables aging, etc. are still AWOL.

- Famous Scooby Doo line

Citron has observed with keen interest developments at Emcore (EMKR) since our first report March 18th and follow-up March 25th. There are a few significant events, all of which point to a ménage trios of convenience between Emcore, Green and Gold Energy and the head cheerleader analyst at Jefferies & Co.

Here is a short and sweet story that has been infesting Wall Street for over 15 years. Valence Technology (VLNC) is one of those “developmentally challenged” companies that never seems to get out of development stage. For 15 years, they’ve claimed to have a lithium battery that is promised to have uses from computers to aircraft to scooters to automobiles. Certainly, there has been a battery of press releases over the past 4 years …. But no meaningful business ever comes to fruition.

It is difficult to write any financial story this week without referring to the complete debacle at Bear Stearns. While there are many lessons here, the pre-eminent one is the corruption of judgment induced by OPM (Other People’s Money). With the huge fees and cash bonuses generated by indiscriminate Wall Street dealmaking, the most fundamental principle has gone out the window: “When you make a loan, lend it out as if you were risking your own money, and when you recommend a stock to the public, act as if your mother was asking for investment advice.”

In what can only be seen as a stunning rebuke for the Letter of Protection scheme at the heart of the “Discocare model”, a Broward County jury awarded the plaintiff a damage claim of only $10,000 in a $1.4m “Discocare model” suit.

The backlash against Citron from ArthroCare (ARTC) and its analysts regarding our analysis of the company has been understandable; sometimes the truth is a hard pill to swallow. While everyone is entitled to their own opinions, no one is entitled to their own facts. The facts surrounding ArthroCare, documented through its own sales materials plus court testimonies and subpoenas, have so explicitly reflected the company’s suspect sales practices that the stock has reacted accordingly. Unfortunately for shareholders, we believe there is much more reacting to come in the future.

It should be clear that the controversy surrounding Arthrocare is not limited to just their spine products, as now we see it has spilled over to sports medicine. Furthermore, as you will read below, it has become a problem in the industry. This does not bode well for a company who just used all of their available cash and more buying stock and buying Discocare – a shadowy entity at the heart of the controversial billing practices in question.

“Oh What a Tangled Web We Weave When First We Practice To Deceive”
Sir Walter Scott

In our last report (pdf file), Citron Research presented a historical record of the Arthrocare CEO pulling the wool over investors’ eyes.

On January 18th, 2007 Arthrocare held a conference call with Bear Stearns with the intention of clearing up the issues surrounding the Discocare acquisition. We now observe history repeating itself – Mr. Baker is up to his old tricks again.