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Sam Antar is a convicted felon and a former CPA. As the CFO of Crazy Eddie, Mr. Antar helped mastermind one of the largest securities frauds uncovered during the 1980s. Today, Sam Antar is a forensic accountant. His primary work focuses on identifying and investigating public companies engaged... More
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  • Open Memo to Medifast Chief Executive and CFO Michael S. McDevitt 3 comments
    Jan 12, 2010 2:54 PM | about stocks: MED

    Open Memo to Medifast Chief Executive and CFO Michael S. McDevitt

    I read Medifast’s (NYSE: MED) self-serving proclamations attacking my friend convicted felon turned fraud fighter Barry Minkow (co-founder of Fraud Discovery Institute or FDI) in both its Q3 2009 10-Q issued last November and reiterated in today’s press release detailed in part below:

    An Independent Committee composed of distinguished members of the Board of Directors of Medifast, Inc. (NYSE: MED) was constituted in February, 2009 to review public allegations of a third party, convicted felon Barry Minkow, and his network of alleged independent experts, posted on Minkow's website alleging illegal activities of Take Shape For Life, Inc., a direct selling company and a subsidiary of Medifast, Inc.

    The independent Directors' Committee, after investigation of facts and information concluded the allegations were false, misleading, and/or without merit. The same is true for the re-issue of the report posted January 8, 2010 – the allegations are false, misleading, and/or without merit.

    The company has made a formal complaint to the United States Securities and Exchange Commission and the Maryland Securities Commissioner.

    Note: I added links to Fraud Discovery's web site and reports for clarity.

    While Medifast's so-called “independent” directors may meet the legal tests of independence under New York Stock Exchange rules as you claim, they are certainly less independent than Bagell, Josephs, Levine & Company, the company's so-called independent auditors. Each director holds stock or stock options in Medifast, unlike the company's auditors who cannot own stock in an audit client (Source: Medifast Proxy Statement dated August 25, 2009). In any case, your auditors seem to have their own share of independence and competency issues, too (detailed here).

    However, Medifast is attempting in smear Barry Minkow because he has publicly disclosed that he is a short seller and his company Fraud Discovery Institute has issued various reports raising serious issues about Medifast's questionable financial disclosures, business model, and marketing practices backed up with an outside expert's report and other data made fully available to the public for examination. According to Fraud Discovery's recent rebuttal:

    According to FDI Co-Founder Barry Minkow, “there is only one problem with the above statement. Neither FDI nor myself made the detailed allegations in previous reports released on the official FDI website. On the contrary, FDI sought the outside opinion of nationally recognized, multi-level marketing expert Robert Fitzpatrick, who has testified for law enforcement on numerous occasions about these kinds of schemes. Mr. Fitzpatrick is not a short-seller and has never had a financial interest in Medifast’s stock at any time nor would Mr. Fitzpatrick, for the nominal fee paid for his analysis of the Medifast business model, make up out of thin air the specific problems inherent with the company.

    In contrast, Medifast has utterly failed to issue any detailed line-by-line rebuttal of any issues raised in Fraud Discovery Institute's reports concerning the company. Simply disclosing that Medifast issued a “formal complaint to securities regulators” without issuing a detailed public rebuttal of FDI's reports seems like an attempt to scare off Minkow with threats of a government investigation, rather than transparently address the serious issues raised in those reports. In addition, I remind you that Barry Minkow has a first amendment right to critique your company, notwithstanding the fact that he publicly disclosed that he holds a short position in your company and is a convicted felon.

    Back in November 2008, Medifast claimed that it made a “formal complaint to the United States Securities and Exchange Commission and the Maryland Securities Commissioner.” However, Barry Minkow informs me that he has not been contacted by either regulator regarding your formal complaints.

    I can assure you that Barry Minkow would welcome scrutiny from any regulator along with their concurrent scrutiny of Medifast’s questionable financial disclosures, business model, and marketing practices. Minkow is unafraid to defend FDI's detailed case that your company is a scam preying on the hopes and dreams of thousands of unsuspecting gullible people who buy into your multi-level marketing scheme, never to collect any net profits on their investments.

    Here’s a suggestion. Why don’t you publicly debate Barry Minkow in front of TV cameras (without lawyers to sanitize your communications) about the issues raised in his reports? In other words, cut the BS and show some balls: put up or shut up.


    Sam E. Antar


    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 committed my crimes, simply because I could.

    If it weren't for the 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.

    I do not own Medifast securities short or long. From time-to-time, I do research on scam companies for Fraud Discovery Institute. However, this open letter is an unsolicited freebie. In any case, please feel free to add my name to any allegations you make to securities regulators and see if I give a damn.

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Comments (3)
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  • cjstl
    , contributor
    Comments (2) | Send Message
    I don't blame Mr. Minkow for manipulating the market in order to profit from his short position - I blame the market for being so easily manipulated by such an obviously self-serving move. I know a number of medical professionals who are making tens of thousands of dollars a month on Medifast while their patients lose hundreds of pounds. Perhaps it is a conflict of interest for a doctor to sell a product to their patients, but the fact remains these doctors believe in Medifast's product and certainly don't feel that the company has prayed on their hopes and dreams. I am personally thankful for Mr. Minkow's report, as I have made a fantastic gain off of the shares I purchased at $5 a piece immediately after he issued the report, but I remain mystified as to how the SEC allows such blatant manipulation.
    12 Jan 2010, 06:06 PM Reply Like
  • Suzenna
    , contributor
    Comments (6) | Send Message
    Why would you think that its a conflict of interest for a doctor to recommend a product that works. Would you say that about aspirin? Medifast is a good product. I have used it successfully - recommended it to my friends and family, researched the company and found them to be well run with a very good product. That is why I bought the stock.
    I agree that I too am mystified about the SEC allowing such blatant manipulation. But, since selling short seems to be legal and here to stay - maybe if we, as individuals, call out creeps like Antar and Minkow, and put pressure on the editors of this and other sites like this, it might make a bit of a difference.
    4 Feb 2010, 11:14 AM Reply Like
  • Ghutchin
    , contributor
    Comments (12) | Send Message
    Any new comments on Medifast given the recent accounting restatements which seemed to be reasonable (but still an error) and their very earnings release from yesterday (May 9, 2011) that the market seemed to approve of.


    Are you still supporting Minkow even after being convicted AGAIN? Why would a company's CEO openly debate a multiple convicted felon and fraudster?


    It looks like Medifast has done and is doing the right thing, just as Fairfax Financial has done, which is let the numbers speak for themselves.
    10 May 2011, 04:59 PM Reply Like
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