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Sam E. Antar
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I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other family members mastermind one of the largest securities frauds uncovered during the 1980s. My responsibilities at Crazy Eddie included skimming, money laundering, insurance fraud,... More
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White Collar Fraud
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  • Why White-Collar Criminals Should Thank President Obama and Congressional Republicans
    Last night, in his address before Congress, President Barack Obama said, "We're also planning to cut away the red tape that prevents too many rapidly growing start-up companies from raising capital and going public." Perhaps, President Obama does not understand that it is already easy for private companies to cut "red tape" and go public through what is known as a reverse-merger. Fraudulent companies have routinely used reverse-mergers to avoid regulatory scrutiny and defraud investors. If Obama wants to cut more "red tape" it will be even easier for white-collar criminals to defraud investors.

    Meanwhile, congressional Republicans have already succeeded in cutting funding for the Securities and Exchange Commission despite increased responsibilities under the Dodd-Frank Act. According to the New York Times, an S.E.C. memo warned: “We may be forced to decline to prosecute certain persons who violate the law; settle cases on terms we might otherwise not prefer; name fewer defendants in a given action; restrict the types of investigative techniques employed; or conclude investigations earlier than we otherwise would.” Therefore, white-collar criminals may have less reason to worry about an underfunded and overburdened S.E.C. investigating and prosecuting them.

    In a reverse-merger, a private company acquires control of an S.E.C. registered public shell company. The public shell company is called a "shell" because it exists mainly on paper. It has an organizational structure, but has no assets or liabilities. A reverse-merger allows a private company to bypass the lengthy and complex process of going public and intense scrutiny by federal and state regulators, because the process was completed beforehand with the shell public company.

    On June 9, 2011, the Securities and Exchange Commission issued the following advisory:

    Given the potential risks, investors should be especially careful when considering investing in the stock of reverse merger companies,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “As with any investment, investors should thoroughly research the company – including ensuring there is accurate and up-to-date information – before making a decision to invest.”
    Reverse mergers permit private companies, including those located outside the U.S., to access U.S. investors and markets by merging with an existing public shell company. The SEC and U.S. exchanges recently suspended trading in a more than a dozen reverse merger companies, citing a lack of current, accurate information about these firms and their finances. [Emphasis added.]

    We must eliminate reverse-mergers which are exploited by fraudulent companies to raise capital from gullible investors. If anything, the government needs to strengthen regulatory scrutiny of private companies seeking to raise capital from the public to prevent future frauds.

    Further, the S.E.C. needs more resources to investigate suspected wrongdoing and prosecute criminals. Cuts to the S.E.C.'s budget by congressional Republicans had no effect on the budget deficit. The S.E.C. is financed by fees levied on companies it regulates, not taxpayer revenue. New York City has ten times more cops than the S.E.C. has employees and twice as many cops than Special Agents employed by the F.B.I.

    Last May, the Washington Times reported that the Obama administration is allowing the Justice Department and the S.E.C. to rely on internal investigations by companies suspected of wrongdoing as a means to save money. Does the Obama administration really believe that white-collar criminals can do a credible job investigating themselves?

    Cutting "red tape" and the S.E.C.'s budget will result in more fraud on investors and less criminals being investigated and prosecuted for their crimes. The Obama Administration and congressional Republicans are making life easier for white-collar criminals. When the door is open, white-collar criminals will walk right through it.

    Written by,

    Sam E. Antar

    Recommended reading


    Footnoted.com - The Footnoted Jobs Program... by Michelle Leder

    Business Insider - "The Feds Are Drinking The Same Kool-Aid As Crazy Eddie's Former Auditors" by Sam E. Antar

    Dag Blog -"Crazy Eddie" Fraudster Sam Antar To Return To Crime - Thanks to Darrell Issa & Anti-Regulation Republicans by William K. Wolfrum

    Disclosure

    I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.

    If it weren't for the heroic efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

    There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them as an independent whistleblower. In addition, I teach about white-collar crime for government entities, professional organizations, businesses, and colleges and universities.

    I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time. My past sins are unforgivable.
    Sep 09 2:45 PM | Link | Comment!
  • Why did Green Mountain Coffee Roasters miss red flags?
    I’d like to know how Green Mountain Coffee Roasters (NASDAQ: GMCR) could have missed significant accounting problems in its Timothy’s subsidiary months before it reported an inquiry by the Securities and Exchange Commission into its corporate-wide revenue reporting and months before it claims to have discovered certain accounting errors.

    Background

    On September 28, 2010, Green Mountain disclosed that the SEC started an informal inquiry into its revenue accounting practices and relationship with a certain fulfillment vendor eight days earlier. On that same day, the company coincidently reported that it discovered an accounting error involving its K-Cup margin percentages during the preparation of its financial report for the period ended September 25, 2010. On November 19, 2010, Green Mountain disclosed that it found four new accounting errors. On that date, the company said it would restate its financial reports issued from 2007 to the thirteen-week period ended June 26, 2010 to correct its errors and conceded that there were material weaknesses in internal controls. Class action lawsuits allege that the company knew about accounting irregularities, but failed to disclose them. The plaintiffs are alleging that the company deliberately manipulated its earnings.

    Red flag

    Last February, I examined Green Mountain Coffee’s financial reports that were issued before its restatement. I looked for unusual trends in its various subsidiaries such as Timothy's. According to my calculations, Timothy's revenues were $2.298 million and income before taxes was $4.690 million for the thirteen weeks ended June 26, 2010. Timothy’s income before taxes exceeded revenues by $2.392 million in that period.

    Note: At that time, Green Mountain Coffee did not report individual thirteen week numbers for Timothy's. I subtracted Timothy’s revenue and income before taxes for the twenty-six weeks ended March 27, 2010 from the totals for thirty-nine weeks ended June 26, 2010 to calculate its numbers for the thirteen weeks ended June 26, 2010.

    The only way that income before taxes could exceed revenues is when non-operating income exceeds operating income. That seemed highly unlikely given the company’s reported consolidated numbers and accounting policies for subsidiaries. It is a red flag that should have invited early scrutiny by management.

    Revised numbers after restatement show significant changes

    In the latest 10-Q for the thirteen weeks ended June 25, 2011, Green Mountain Coffee reported the following revised financial results at Timothy's for the previous year's thirteen week period ended June 26, 2010:

    For the thirteen weeks ended June 26, 2010, the Timothy’s operations contributed an additional $10.3 million of revenue and $3.8 million of income before taxes.

    Before Green Mountain Coffee restated its financial reports, Timothy’s revenues were $2.298 million and income before taxes were $4.690 million. After the restatement, the company now claims that Timothy's revenues were $10.3 million and income before taxes was $3.8 million for that same period. Timothy’s revised revenues turned out to be about $8 million higher than originally reported (348% higher) and revised income before taxes was about $0.9 million less than originally reported.

    Further, the company's revised numbers show that my previous concerns about missing a significant red flag in Timothy's was apparently correct. It turns out that revised numbers for Timothy's show that income before taxes did not exceed revenues in the thirteen weeks ended June 26, 2010. Why did Green Mountain Coffee miss that significant red flag?

    Revised numbers still don't add up

    Even Timothy's revised income before taxes for each individual thirteen week period does not add up to the year-to-date totals. In the 10-Q report for the thirteen week ended December 25, 2010, the company disclosed the following revised results for Timothy's in the previous year thirteen week period ended December 26, 2009:

    ...the Timothy’s acquisition resulted in an additional $4.1 million of revenue and $0.0 million of income before income taxes. [Emphasis added.]

    In the 10-Q report for the thirteen week ended March 26, 2011, the company disclosed the following revised results for Timothy's in the previous year thirteen week period ended March 27, 2010:

    ...the Timothy’s operations contributed an additional $13.0 million of revenue and $3.8 million of income before taxes. [Emphasis added.]

    In that same 10-Q report for the quarter ended March 26, 2011, Green Mountain Coffee reported the following revised financial results for Timothy's in the previous year twenty six week period ended March 27, 2010:

    ...Timothy’s operations contributed in an additional $17.2 million of revenue and $2.8 million of income before income taxes. [Emphasis added.]

    Green Mountain Coffee's revised numbers for Timothy's don't add up. Timothy's revised income for before taxes for the twenty-six weeks ended March 27, 2010 should be $3.8 million, not $2.8 million, if you add up the numbers for each thirteen-week period. That same discrepancy between the individual thirteen week numbers and year to date numbers also carried over in its latest 10-Q report.

    Written by:

    Sam E. Antar
     
    Disclosure

    I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.

    If it weren't for the heroic efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

    There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them as an independent whistleblower. In addition, I teach about white-collar crime for government entities, professional organizations, businesses, and colleges and universities.

    Recently, I exposed GAAP violations by Overstock.com (also known as O.co) which caused the company to restate its financial reports for the third time in three years. The SEC is now investigating Overstock.com and its CEO Patrick Byrne for securities law violations.

    I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time. My past sins are unforgivable.

    I do not own any Green Mountain Coffee Roasters or Overstock.com securities long or short.
    Tags: GMCR
    Aug 11 6:13 PM | Link | Comment!
  • Is Green Mountain Coffee Roasters serving double talk to the press?
    Green Mountain Coffee Roasters (NASDAQ: GMCR) seems to believe its Investor Relations Department can double talk the press and no one will ever notice. Yesterday, the Burlington Free Press published an article questioning whether the company’s stock was “Hot or Overheating?” According to that article:
    Suzanne DuLong, Green Mountain’s vice president of corporate communications, said Green Mountain Coffee Roasters does not comment on its stock price.
    Just a month earlier, on June 15, 2011 Suzanne DuLong was interviewed by Seven Days about the ongoing Securities and Exchange Commission probe of the company, class action lawsuits, various new accounting irregularities uncovered in this blog, and possible Regulation FD violations uncovered by best-selling author Roddy Boyd. According to Seven Days:
    DuLong wouldn’t comment on claims made in the shareholder lawsuit, either, but noted: “I would suggest that you perhaps look at where the stock price was trading at the point that lawsuit was filed and where it’s trading right now.”
    DuLong cited its increased “stock price” as a reason for investors to discount fraud allegations made in the class action complaint. However, according to the Burlington Free Press, “Suzanne DuLong… said Green Mountain Coffee Roasters does not comment on its stock price.” While DuLong “wouldn’t comment on claims made in the shareholder lawsuit”, she clearly commented on the stock price when asked about that lawsuit.

    Back on March 11, 2011, Reuters published an article about a patent litigation between Green Mountain Coffee and Sturm Foods. According to Reuters:
    Green Mountain spokeswoman Suzanne Dulong said the company does not comment on pending litigation matters.
    Yet again, her comment in June for the Seven Days article clearly was a comment about pending litigation.

    Back even further on February 25, 2011, CNBC Senior Stocks Commentator Herb Greenberg asked Green Mountain Coffee about the very same class action lawsuit which was later commented on by Suzanne DuLong to Seven Days. According to Greenberg:
    As a matter of practice, Green Mountain told me it does not comment on lawsuits.
    Does Green Mountain Coffee change its policies depending on which journalist asks the question? The company commented on the class action lawsuit to Seven Days, but not to CNBC. DuLong commented on the stock price to Seven Days, but not to the Burlington Free Press.

    It seems that it’s time for Green Mountain Coffee to get its story straight. Does it comment on the stock price? Does it comment on pending litigation? DuLong said the company comments on neither, yet proceeded to comment on both when it suited her company's agenda. According to Green Mountain Coffee's Code of Ethics:
    Share our story while following the Media Relations guidelines that promote consistent communications.
    Newspapers, magazines, radio or television often request information about GMCR. Because of the high-profile, public nature of our company, it is important to speak to the media with one voice about our business and to represent GMCR's story and purpose in a consistent manner.
    To help ensure this consistency we've come up with a few ground rules:
    • All inquiries about earnings releases, finances, or investor relations should be promptly referred to the Chief Financial Officer or the VP of Investor Relations.
    • The Director of Public Relations, the CEO, the VP of Marketing, the President, the Corporate General Counsel, or the Chief Human Resources Officer must approve any press releases, statements to the press or interviews with the media in advance.
    • Employees who are contacted by the media must work with the Director of Public Relations, the CEO, the President, the Chief Human Resources Officer, the Corporate General Counsel, or the VP of Marketing before being interviewed to review what is, and what is not, public information.
    Apparently, part of the "consistent communications" that Green Mountain Coffee is trying to promote in telling its "story" to the press seems to include a consistent serving of double talk about not commenting about its stock price and pending litigation. Its Code of Ethics makes me wonder if DuLong is acting alone or receiving instructions from others at the company.

    Written by:

    Sam E. Antar

    Disclosure


    I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could. If it weren't for the heroic efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

    There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them as an independent whistleblower. In addition, I teach about white-collar crime for government entities, professional organizations, businesses, and colleges and universities.

    Recently, I exposed GAAP violations by Overstock.com (also known as O.co) which caused the company to restate its financial reports for the third time in three years. The SEC is now investigating Overstock.com and its CEO Patrick Byrne for securities law violations (Details here, here, and here). I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time. My past sins are unforgivable.

    I do not own any Green Mountain Coffee Roasters or Overstock.com securities long or short.
    Tags: GMCR
    Jul 19 11:44 PM | Link | 2 Comments
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