Sam E. Antar's  Instablog

Last evening Overstock.com (NASDAQ: OSTK) held a conference call to discuss certain financial reporting violations covered extensively in this blog, their firing of Grant Thornton as their auditors who agreed with me on the accounting issues now being investigated by the SEC, and their unprecedented filing on an "unreviewed" Q3 2009 10-Q.

I sent emails to Overstock.com CEO Patrick Byrne (pictured above) and that were cc'd to other persons at the company requesting to ask questions during the call about the company's establishment of an improper "cookie jar reserve" in Q3 2008 to materially overstate it financial performance in later quarters. Instead, Byrne stonewalled me in his responses to my emails.

In any case, I dialed into the call, identified myself to the operator, and Patrick Byrne was aware of my presence on the call. When they requested questions from the participants, I dialed *1 as instructed by them. The company took questions from other participants in the call. However, my attempts to ask important questions about the issues at hand were blocked by Overstock.com. Their statement that there were "no more questions" is a flat out lie. Patrick Byrne is simply afraid to answer my questions about Overstock.com's financial reporting violations in an open forum.

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In a real dumb move, Overstock.com (NASDAQ: OSTK), led by CEO Patrick Byrne, dismissed Grant Thornton as the company’s auditors and filed an unreviewed Q3 2009 10-Q because of material disagreements over certain accounting issues with its now fired auditors.

Those material disagreements relate to reports in my blog exposing Overstock.com's establishment of an improper "cookie jar" reserve to materially inflate its future financial performance in violation of Generally Accepted Accounting Principles (GAAP) and SEC disclosure rules. Apparently, Grant Thornton agrees with me and not Overstock.com on the accounting issues. The Securities and Exchange Commission is investigating financial reporting violations by Overstock.com based on those reports in my blog.

Overstock.com scheduled a conference call on Wednesday, November 18, 2009 at 5 PM eastern to discuss the above issues. At this point, I will reserve further comment rather than tip my hand. Instead, I will wait for Overstock.com, its audit committee, its board of directors, and its management team to dig a deeper hole for themselves by continuing to lie to investors about the company's claimed compliance with GAAP and securities laws.

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To Patrick Byrne:

You have denied me personal access to the conference call and have provided arbitrary and unreasonable conditions not imposed on other participants in the call. In any case, I will be seeking access to the call to ask possible follow up questions.

You are perfectly aware that some of my questions involve complicated accounting issues and cannot reasonably be kept to 25 words or less.

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Recommended reading:

Forensic accountant, author, and blogger Tracy Coenen analyzes Overstock.com's (NASDAQ: OSTK) financial reporting violations in her blog post entitled "Conservatism is no exuse for false financial statements, Overstock.com."

In my blog, I detailed Overstock.com's improper use of "cookie jar" reserves that violate Generally Accepted Accounting Principles (GAAP). As a result of my reporting, the SEC re-opened its investigation of Overstock.com.

Overstock.com, led by CEO Patrick Byrne, has already restated its financial reports twice in the last three years. Every financial report issued by the company from its inception has at least initially violated GAAP or other SEC disclosure rules. The company now faces a third restatement of its financial reports as a result of my blog's exposure of improper "cookie jar" reserves.

Posted by:

Sam E. Antar

Disclosure:

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's.

I do not own Overstock.com securities short or long. My research on Overstock.com and in particular its lying CEO Patrick Byrne is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I will probably end up joining corporate miscreants such as Patrick Byrne in hell.

The interview is available on newsstands or it can be downloaded from's Crain's New York Business with a trial subscription here. You can also read the article in Investment News (Crain's sister publication) here.

Here are some quotes:

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In three previous blog posts, I detailed how Overstock.com (NASDAQ: OSTK) violated Generally Accepted Accounting Principles (GAAP) and SEC disclosure rules by improperly deferring the recognition of an accounting error to create a cookie jar reserve to inflate future profits. On October 24, 2008, Overstock.com revealed that it underbilled fulfillment partners in periods prior to Q3 2008 because of customer refund and credit errors. The company improperly chose to recognize future recoveries from underbilling its fulfillment partners on a cash basis (non-GAAP) rather than restating previously issued financial reports to correct the material accounting error (GAAP). Note: Details of my previous blog posts here, here, and here).

More recently, I provided Overstock.com with a series of questions to answer about its accounting errors during its Q2 2009 earnings call (Details here). Rather than answer each of my questions, CEO Patrick Byrne went on a ranting diatribe as described by investigative journalist Gary Weiss in his blog (Details here).

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