Thursday, June 17, 2010

Open Letter to the Securities and Exchange Commission: Can a Convicted Felon Help You Find Financial Reporting Violations?

To the Securities and Exchange Commission Chief Accountant Wayne Carnall:

In my previous Open Letter, I asked the Securities and Exchange Commission Division of Corporation Finance to review Medifast's (NYSE: MED) revenue recognition policy to determine if it complies with Generally Accepted Accounting Principles (GAAP) and SEC Staff Accounting Bulletin Topic 13: A. While I made no allegations of non-compliance with accounting rules, I am concerned about the possibility that Medifast may have prematurely recognized revenue based on a detailed analysis of the company's vague and skimpy financial disclosures.

After all, who am I to make such an allegation against Medifast's "...distinguished board of directors and executive team is populated with members of the U.S. military, the clergy, academia, and the legal profession," since I am a just a convicted felon like my dear friend Barry Minkow, lest I be possibly sued by the company and investigated by the SEC, like Minkow, at the instigation of these "distinguished" men for daring to critique their company? I'd much rather ask the hard working people at the SEC who wisely listened to me about Overstock.com, to get to the bottom of this issue concerning Medifast.

Convicted felons can't be right or can they? Does it not matter that I was right and Overstock.com (NASDAQ: OSTK), its management, its audit committee, and its auditors were all wrong when I correctly identified now confirmed GAAP violations by the company that caused it to restate its financial reports for the third time in three years. Yet, Overstock.com's CEO Patrick M. Byrne has called me "Sam the crook" and his company's website still identifies me as an "anti-Overstock.com" blogger. No good deed goes unpunished, but I digress.

Perhaps, the above "distinguished" people at Medifast can issue a line-by-line response to my analysis as I invited them to do in my last open letter? Are they pussies? Nah, not them. They all call themselves "distinguished" men.

Warning: Antar plays poker with a marked deck. For reference, just ask Overstock.com CEO Patrick Byrne and those hard working people who listened to me at the SEC and are now investigating his company.

To be continued in Open Letter to SEC - Part 3. Forensic accounting in real time!

Update: Part 3 - Open Letter to the Securities and Exchange Commission - Is Medifast Complying with Revenue Accounting Rules?

Respectfully:

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 committed my crimes in cold-blood for fun and profit, and 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.

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.

Recently, I exposed financial reporting violations by Overstock.com (NASDAQ: OSTK) as an independent whistleblower. The Securities and Exchange Commission is now investigating Overstock.com and its CEO Patrick Byrne for securities law violations (Details here, here, and here).

In addition, the SEC is investigating possible GAAP violations by Bidz.com (NASDAQ: BIDZ) after I alerted them about the company's inventory accounting practices.

I do not own Overstock.com or Bidz.com securities long or short. My exposure of confirmed financial reporting violations by Overstock.com and possible financial reporting violations by Bidz.com was a freebie to securities regulators to get me into heaven, though I doubt that I will ever get there.

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.

In the past, I was compensated by Fraud Discovery Institute to do certain research on InterOil and Medifast's auditors. However, I do not own InterOil or Medifast securities long or short. Fraud Discovery Institute, co-founder, Barry Minkow has publicly disclosed that he has held short positions in InterOil and Medifast securities.

I posted my open letters on my blog simply because I could - for fun and enjoyment. In America, even convicted felons like me have rights under the First Amendment to the US Constitution. If anyone has any complaints, please ask your elected officials to change the Constitution, feel free to complain to the SEC, take other legal measures, or rant, yell and scream. I personally don't give a damn.

Finally, I still invite Medifast to publish a detailed line-by-line response to my concerns and I will post such response on my blog.

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