Wednesday, April 23, 2008 SVP Jonathan E. Johnson caught lying in frantic attempt at damage control

As a criminal, I learned the hard way that lies to solve small problems often create even bigger problems. Yesterday, (NASDAQ: OSTK) went on a frantic defensive mode after my Monday blog post detailing how the company illegally manipulated the price of its common shares through a materially and significantly misleading recent earnings release in violation of SEC Rule 10b-5. In the process of attempting to defend's illegal stock market manipulation, Jonathan E. Johnson III (Senior Vice President - Corporate Affairs & Legal) made up new lies and created even more SEC Rule 10b-5 problems for the company. is under investigation by the Securities and Exchange Commission and its CEO Patrick Byrne has admitted to being the target of the SEC probe.

In my previous blog post, one issue of many issues that I detailed was how’s recent Q1 2008 earnings report failed to disclose that the company compared Q1 2008 revenues reported on a GAAP basis to Q1 2007 revenues that were reported on a non-GAAP basis in violation of Statement of Accounting Standards No. 154. However, Jonathan Johnson apparently lied to Betsy Schiffman from, by claiming that reported its Q1 2007 revenues in compliance with GAAP (no surprise). According to the article:

"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.

As detailed above, Jonathan E. Johnson claimed that both Q1 2008 and Q1 2007 revenues in’s Q1 2008 earnings release were reported in accordance with GAAP. However, Jonathan E. Johnson was present during the Q4 2007 earnings call when Patrick Byrne made the surprise announcement that’s revenues and other related items were deliberately not reported in compliance with GAAP and the company's revenue recognition disclosures, which is a violation of SEC Staff Accounting Bulletin No. 99. In addition,’s Q4 2007 8-K report filed with the Securities and Exchange Commission, clearly contradicts Jonathan E. Johnson’s claim to regarding 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.

Since failed to restate revenues through Q3 2007, how could Q1 2007 revenues be reported in compliance with GAAP when such revenues were compared to Q1 2008 in the company's earnings release? Jonathan E. Johnson’s false statement, above, creates even more legal problems for with the Securities and Exchange Commission. Rule 10b-5 expressly makes it “unlawful for any person….to make any untrue statement of a material fact.”

Question for Jonathan E. Johnson: If you can't read my blog since you falsely claim that it's rife with "lies" - then who exactly at is reading my blog? My log reports 394 visits and counting to my blog from people working for

Message to Jonanthan E. Johnson from a convicted felon: The cover up is often worse than the crime.

To be continued....

Written by:

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

Recommended reading:

Tracy Coenen: Latest Lie: 2007 first quarter numbers were GAAP

Gary Weiss:'s 'Stock Manipulation Friday'

Gary Weiss: Tracking the lies of and the Fantasies of Patrick Byrne

Disclosure: At the time of this blog post, I am not short or long

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