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Overstock.com Director James V. Joyce Bolts, Receives Huge Questionable Exit Payment

After yesterday's stock market closed, Overstock.com (NASDAQ: OSTK) announced the resignation of James V. Joyce from its Board of Directors. However, Overstock.com's press release made no reference to a $1,250,000 payment for the termination of consulting services to Icent LLC, a management consulting company headed by Mr. Joyce. Overstock.com left investors the mundane task of finding out about the $1,250,000 termination payment by disclosing it in a separate SEC filing. See below:
Overstock.com press release:
SALT LAKE CITY, April 1 /PRNewswire-FirstCall/ -- Overstock.com, Inc. (Nasdaq: OSTK) today announced that James V. Joyce has resigned from the Board of Directors of Overstock.com. Chairman and CEO Patrick Byrne said, "James' consulting engagement has been concluded with his customary extraordinary results. James' advice has been of tremendous value to me, the board, and the company for years, but especially over the last two years of getting the company back on the rails. I am deeply in his debt." Mr. Joyce had been a director since January 2008.
Note: Bold print and italics added by me.
Separate Overstock.com 8-K report filed with the SEC:
On April 1, 2009 Mr. James V. Joyce resigned from his position as a member of the Board of Directors of Overstock.com, Inc. (the “Company”). Mr. Joyce’s resignation is not the result of a disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Joyce and the Company are concurrently ending the Company’s consulting arrangement with Icent LLC, which is a management consulting company of which Mr. Joyce is the chief executive officer, and through which Mr. Joyce has provided consulting services to the Company. In connection with the termination of the consulting arrangement, the Company has agreed to pay $1,250,000 to Mr. Joyce.
Note: Bold print and italics added by me.
On January 14, 2008, James Joyce replaced former company President Jason C. Lindsey on Overstock.com's Board of Directors after Lindsey resigned from both posts (President and Board Member) at the company. Jason Lindsey's resignation letter was dated December 31, 2007. However, in a separate sworn declaration filed in connection with a court proceeding, Lindsey said he resigned on January 2, 2008. In addition, a revolving line of credit note dated January 1, 2008 still listed Lindsey as a person "authorized to request advances" despite his claimed resignation as President of Overstock.com, a day earlier. Apparently, Lindsey's backdated his resignation.
Overstock.com's $1,250,000 contract termination payment to former Board member James Joyce is over five times the sum of $225,000 in consulting services "authorized to be paid to Mr. Joyce for services rendered to the Company during 2007." The company has not disclosed additional amounts in consulting services paid to Mr. Joyce in 2008 or 2009 to-date, aside from the termination fee.
See Overstock.com 8-K SEC filing dated January 14, 2008 below:
On January 14, 2008 the Board of Directors of Overstock.com, Inc. (the “Company”) appointed James V. Joyce to the Board of Directors. Mr. Joyce has served as a consultant to the Company since September 2005. The aggregate amount the Company has paid to Mr. Joyce since January 1, 2007 is $615,000 (including $225,000 authorized to be paid to Mr. Joyce for services rendered to the Company during 2007). The Company has previously granted Mr. Joyce options to acquire 40,000 shares of the Company’s common stock at a weighted average exercise price of $30.38 per share. In connection with the restricted stock unit grants described below, on January 14, 2008 the Company also granted Mr. Joyce restricted stock units to acquire 15,000 shares of the Company’s common stock under the Company’s 2005 Equity Incentive Plan and entered into or will enter into a Restricted Stock Unit Grant Notice and Restricted Stock Agreement with Mr. Joyce in substantially the form filed herewith as Exhibit 10.1. A copy of the press release issued by the Company on January 14, 2008 is attached hereto as Exhibit 99.1 and is incorporated by reference.
A shrewd person posting on the Yahoo message board noted:
And another thing - why does a retailer that's been in business a decade need "management" consulting services (rhetorical question, I know the answer)? What aspect of "management" was Mr. Joyce consulting on? How many FTE's were consulting under Joyce's banner that would require a contractual payout of a whopping 1.25 million? How many man hours does that payout represent?
Let's see, the avg cost of a non top-tier name "management consultant" has gotta be billed at around $150/hr or so these days.
Sooooooo, that's a payoff of over 8,000 man hours.
Ok hec, let's say Joyce was worth every penny of $500/hr - that's a payout of 2,500 man hours. Under most standard per-diem consulting contracts, the contracting company only has to provide 2-weeks termination warning or forfeit 2 weeks of billings. Let's see...80 hours of billable hours at the fantastic rate of $500/hr = $40,000.
Ok longs - speak up - is THIS the kind of shareholder equity stewardship you are expecting from Patrick Byrne?
Stinky, stinky
Why has Overstock.com paid James Joyce such a huge sum to terminate his consulting agreement? Masquerading stock market reformer Patrick Byrne has claimed that he has "gold standard in communicating with candor” Overstock.com’s results. However, Overstock.com left out any mention of such a huge payment in its press release, leaving investors the mundane task of digging through SEC filings to obtain information about the contract termination payment.
Overstock.com CEO Patrick Byrne once said:
In our public SEC filings we chose principles at the conservative edge of GAAP….
Note: Bold print and italics added by me.
However, Overstock.com violated GAAP in just about every financial report since inception (Details here, here, and here).
Written by:
Sam E. Antar (former Crazy Eddie CFO and a convicted felon)
Disclosure:
I have no position in Overstock.com securities, long or short.

Comments

And now, even stinkier, Wacky Paddy has rolled some senators:

By Sarah N. Lynch
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Six Democratic and Republican senators sent a
letter this week to Securities and Exchange Commission Chairman Mary
Schapiro saying they will take legislative action if the SEC fails to
address "abusive" naked short-selling.

In a two page letter, Sens. Carl Levin, D-Mich., Arlen Specter, R-Pa.,
Saxby Chambliss, R-Ga., Jon Tester, D-Mont., Ted Kaufman, D-Del., and
Johnny Isakson, R-Ga., said they were troubled by the findings in the
SEC inspector general's recent report which found that the enforcement
division took no action to curb abusive short-selling despite
receiving more than 5,000 complaints.

"Equally troubling is the division's reluctance to agree with the
inspector general and the commission itself that naked short-selling
is harmful," the senators said in their letter. "As the new leader at
the SEC, you have an opportunity to clarify the commission's
commitment to end abusive short-selling."

Short selling, or borrowing and then selling shares in the hope the
stock price will fall, has been blamed by many for driving down the
shares of financial stocks. Of particular concern to some critics is
naked short-selling, in which investors sell the stock without first
borrowing the shares.

The SEC is slated to take up the issue of short-selling on April 8
when the commissioners will consider proposals to reinstate the uptick
rule, or something similar to it. The rule, which the SEC did away
with in 2007, prevented traders from doing a short sale unless the
price of the stock from the most recent trade was higher than the
previous price.

The SEC's inspector general, David Kotz, released a report on naked
short-selling last month that criticized the enforcement division for
how it handled short-selling complaints. The division dissented from
most of the report's findings, saying the inspector general was unable
to cite any "bona fide studies or empirical data regarding the
practice's market impact."

In their letter, the senators urge the SEC to bring back the uptick
rule, among other things.

"To be clear, we are not opposed to short-selling itself, which can
enhance market efficiency and price discovery," they said. "But naked
or abusive short-selling has gone unaddressed for far too long and
simply must end if the SEC is to restore investor confidence in the
markets. In the absence of a strong message from the SEC, we believe
Congress will need to consider legislation that directs the SEC to do
so."

-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com

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