Thursday, July 31, 2008

Why Jonathan Johnson is the Right Choice for President of

The more that I think about it, I believe that former Vice President of Corporate Affairs and Legal, Jonathan E. Johnson III, is just the right man to take over Patrick Byrne’s role as President of (NASDAQ: OSTK). Patrick Byrne retains the title of Chief Executive Officer.

Role as babysitter for the 40-year-old CEO of a public company

According to’s press release, it was Jonathan Johnson’s early role to provide “adult supervision” as babysitter for his boss Patrick Byrne, the immature, lying, delusional, and paranoid CEO of Jonathan Johnson joined in 2002 and Patrick Byrne was a tender 40 years old when Johnson began babysitting the CEO of a public company. Jonathan Johnson provided key feedback to Patrick Byrne in shaping’s policy of blaming others for’s management failures through litigation rather than make money through innovation. He is the key legal advisor for Byrne's relentless and despicable smear campaign against critics of the company. Litigation rather than make money through innovation

The perennially profitless retailer has bought lawsuits against critics such as independent research firm Gradient Analytics and short seller Copper River Management (formerly Rocker Partners) blaming them for’s continual business foul ups. has never turned an annual profit and has reported an accumulated deficit of $254 million since its inception in 1997.’s only two reported quarterly profits ever (Q4 2002 and Q4 2004) were overstated as a result of an intentional revenue accounting error in violation of GAAP that was uncovered by the Securities and Exchange Commission.

Lies to

Despite the SEC’s finding that’s revenue accounting was not reported in compliance with GAAP from inception until Q3 2007, Johnson went on to falsely claim to that such revenues were reported in compliance with GAAP. When failed to disclose in its Q1 2008 earnings release that the company compared Q1 2008 GAAP revenues to Q1 2007 non-GAAP revenues and as a result overstated its growth, it was Jonathan Johnson who lied to and falsely claimed that Q1 2007’s revenues were reported in compliance with GAAP. See excerpts from article below:

"In its earnings release, failed to disclose that it compared first-quarter 2008 revenues reported on a GAAP basis to first-quarter 2007 revenues that were reported on a non-GAAP basis," Antar wrote on his White Collar Fraud blog.

For those who don't speak accountantese, "non-GAAP" basically refers to non-standard accounting practices, and the difference between GAAP and non-GAAP numbers is often substantial.

"Sam is just wrong," says Jonathan Johnson, senior vice president of legal at Overstock. "They're both GAAP numbers . . . I can't read his blog because it's so full of lies."

Note: Bold print and italics added by me.

However,’s Q4 2007 8-K report filed with the Securities and Exchange Commission, clearly contradicted Jonathan E. Johnson’s claim to regarding the company’s reported Q1 2008 and Q1 2007 revenues that “They’re both GAAP numbers….”

From the company’s inception through the third quarter of 2007, we have recorded revenue based on product ship date. In the fourth quarter of 2007, in response to an accounting comment from the staff of the SEC, we retrospectively changed our policy to recognize revenue based on estimated product delivery date. We have recorded the cumulative effect of this change in the fourth quarter of 2007.

Note: Bold print and italics added by me.

In a previous blog post, I detailed how misled the SEC about the materiality of its revenue accounting error and as a result, the company wrongfully used a one-time cumulative adjustment to correct previous revenues in Q4 2007 rather than restate such revenues from inception. Therefore, never corrected Q1 2007 reported revenues to conform with GAAP since the company never restated such revenues. As an attorney and new President of, Jonathan Johnson should study Rule 10b-5, which expressly makes it “unlawful for any person….to make any untrue statement of a material fact.”

Stock sales coinciding with lie to

After Jonathan Johnson lied to, he dumped shares and pocketed almost $1 million in gross proceeds. The day after the article was published, Jonathan Johnson pocketed $699,000 from dumping shares and on the next day, Johnson pocketed another $258,000 from dumping even more shares. In addition, Jonathan Johnson has received a raise in salary to $225,000 per year as a result of his promotion to President of

If you ever wondered why CEO is a habitual liar who blames a Sith Lord and critics for the company’s woes, perhaps you should look no further than his babysitter, Jonathan Johnson. He fits in perfectly with's culture of lies and deceit.

To be continued….

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Note: For additional information about, please read Gary Weiss and Tracy Coenen's blogs.

Disclosure: Not long or short

Additional information: Index to all White Collar Fraud blog posts.