Skip to main content Issues Unregistered Shares to 401-K Plan (NASDAQ: OSTK), led by masquerading stock market reformer CEO Patrick Byrne (pictured slobbering drunk to the right), can’t seem to maintain proper internal controls for financial reporting. Just last Friday, disclosed that it improperly issued an extra 201,421 unregistered shares of common stock in connection with the company’s 401-K Plan. The company had to file a new registration statement with the Securities and Exchange Commission relating to those improperly issued unregistered shares. In addition, the company disclosed that it “may be subject to civil and other penalties by regulatory authorities as a result of the failure to register these transactions.” See below:

Note 8 — Unregistered Shares of

In June 2009, the Company discovered that it inadvertently issued 201,421 more shares of the Company’s common stock in connection with the Plan than were registered on the previously filed Registration Statement on Form S-8 (File No. 333-123540) relating to the Plan. Because the Company sponsors the Plan, it is required to register transactions in the Plan related to shares of common stock. In July 2009, the Company filed a new registration statement on Form S-8 (File No. 333-160512) to register future transactions in the Plan.

The Company has always treated the shares issued in transactions with the Plan as outstanding for financial reporting purposes.

The Company believes that it has always provided the employee-participants in the Plan with the same information they would have received had the additional shares been registered. Original purchasers of the Shares may have rescission rights with respect to such Shares under applicable federal securities laws for up to one year following the date of acquisition of the shares. These rescission rights represent a contingent liability of the Company. In addition, the Company may be subject to civil and other penalties by regulatory authorities as a result of the failure to register these transactions.

Note: Bold print and italics added by me.

Two weeks ago, I tipped off AOL syndicated blogger Zac Bissonnette that filed Form 12b-5 "Notification of Late Filing" due to the company's issuance of unregistered shares into its 401-K Plan. Bissonnette reported:

Here's today's update from the irony department -- special thanks to Sam E. Antar for e-mailing it to me. From a FORM 12b-25 filed with the SEC on June 30th:

"The Company recently discovered that it inadvertently issued more shares of the Company common stock in connection with its 401(k) Plan than were registered on the Registration Statement on Form S-8 (File No. 333-123540) relating to the plan. The Company needs additional time to ascertain the facts relating to this issue and to analyze the effects, if any, on the plan."

This would be a funny little accounting screw-up at any company, but that it happened at (NASDAQ: OSTK) makes it especially hilarious: This is a company whose CEO has complained to anyone would listen of a massive conspiracy to counterfeit shares of his company's stock and then sell them into the market -- driving down the stock price and allowing short sellers to profit.

And now we find out that Overstock itself was issuing shares beyond what had been registered with the SEC!

Note: Bold print and italics added by me.

This blog has exposed other financial reporting irregularities in the past.

For example, I discovered that from Q2 2007 to Q3 2008, improperly used a non-compliant EBITDA (Earnings before interest, taxes, depreciation, and amortization) in violation of Securities and Exchange Commission Regulation G governing non-GAAP financial measures. improperly reconciled EBITDA to operating income, rather than net income and improperly excluded stock-based compensation expense from its non-compliant EBITDA. As a result of violating SEC Regulation G, materially overstated its financial performance from Q2 2008 to Q2 2008.

In late 2007, I notified and the SEC of the company's violation of Regulation G. However the company stubbornly refused to comply with Regulation G and report a compliant EBITDA until it filed its Q3 2008 10-Q report with the SEC (Details here).

More recently, I discovered that violated Generally Accepted Accounting Principles (GAAP) by using accounting errors arising in previous reporting periods to improperly and materially overstate reported income in later accounting periods (Q4 2008 and Q1 2009 so far) in violation of Statement of Accounting Standards No. 154 (Details here). I notified and the SEC of the company's GAAP violation. So far, has failed to comply with GAAP and the SEC cannot comment about the issue as per their policy. In the mean time, let's see if stubbornly digs itself into a deeper hole when its reports Q2 2009 financial results.

To be continued....

Written by:

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 family members mastermind one of the largest securities frauds uncovered during the 1980s. I pleaded guilty to three felonies.

I have no position in securities, long or short. My research on is a freebie for securities regulators to help me try to get into heaven for my past sins, though I doubt I can ever make up for my past evil acts.


Popular Posts

Did a Clever SEC Bait Goldman Sachs into Compounding Its Legal Problems With the "Kiss of Death" Message?

Updated: At 3:48 AM ET 04/20/2010 on bottom

The Kiss of Death

In filing its lawsuit against Goldman Sachs (NYSE: GS) on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had … CEO Patrick Byrne Sleeps With a Gun

Suggested Reading: Hatchet Man Judd Bagley's Downward Spiral: Junkie, Confessed Criminal, Admitted Adulterer by Sam Antar (here), and Closing the File on a Criminal and Junkie Named Judd Bagley by Gary Weiss (here)

In numerous blog posts in the past, and in widespread media coverage, evidence has accumulated for years that CEO (NASDAQ: OSTK) Patrick Byrne has shown signs of being mentally unbalanced and paranoid.

Byrne has blamed his company's financial woes on an unnamed "Sith Lord." He hired paid goons to stalk his real and imagined adversaries and to write lengthy conspiracy theories on the Internet. Byrne has close ties with Bo Gritz. The Anti-Defamation League lists Bo Gritz as a far-right extremist with “extensive connections to both white supremacists and anti-government groups and leaders.”

Patrick Byrne's infamous temper tantrums when he doesn’t get want he wants are well documented too. He made obscene and misogynistic commen…

Nature's Sunshine Products, Willbros Group, Cal Dive International, and BSQUARE Violate S.E.C. Rules on Calculating EBITDA

Nature’s Sunshine Products (NASDAQ: NATR), Willbros Group (NYSE: WG), Cal Dive International (NYSE: DVR), and BSQUARE (NASDAQ: BSQR) have recently issued earnings reports which include a calculation of EBITDA (earnings before interest, taxes, depreciation, and amortization) that apparently does not comply with Securities and Exchange Commission interpretations for Regulation G governing such non-GAAP financial measures. In each case, their erroneous EBITDA calculations have enabled them to significantly distort their financial performance by erroneously reporting a positive EBITDA, when they should have reported a negative EBITDA in the latest quarter.

How EBITDA is supposed to be calculated under Regulation G

According to the S.E.C. Compliance & Disclosure Interpretations, EBITDA is defined under Regulation G as net income (not operating income) before net interest, taxes, depreciation, and amortization. See below:

Question 103.01Question: Exchange Act Release No. 47226 describes E…

InterOil, John Thomas Financial, and Clarion Finanz: Anatomy of a Stock Market Manipulation Scheme

In this blog post, I will provide evidence of what I believe is a stock market manipulation scheme involving InterOil (NYSE: IOC), John Thomas Financial, and Clarion Finanz AG. I believe that InterOil with the assistance of Clarion Finanz concealed John Thomas Financial’s involvement in helping it raise $95 million through a private placement of convertible debt securities.

Clarion Finanz acted as a buffer between InterOil and John Thomas Financial to help InterOil hide John Thomas Financial's role in raising funds. Afterwards, InterOil filed false and misleading reports with the Securities and Exchange Commission in an effort to conceal John Thomas Financial’s role in helping the company raise $95 million in convertible debt.

Carl Caserta, who in 1991 was barred by the Securities and Exchange Commission from “association with any broker, dealer, or investment advisor” played a role in helping InterOil use John Thomas Financial to obtain funds from investors. InterOil, John Thoma…

Class Action Complaint against Amedisys uses Sarbanes-Oxley Act Corporate Governance Provisions to Battle Alleged Corporate Malfeasance

Updated at bottom of article

Last week, Pomerantz Haudek Grossman & Gross LLP filed a class action lawsuit against Amedisys (NASDAQ: AMED) charging the company, its CEO William F. Borne and its CFO Dale E. Redman with securities fraud.  In the next few days, Bernstein Liebhard LLP and Finkelstein Thompson LLP filed similar class action lawsuits against the company. The lawsuits allege that Amedisys abused Medicare's reimbursement system for at-home therapy care based on a compelling analysis of company revenues in an April 27 Wall Street Journal article.

In addition, the lawsuits innovatively utilize a provision under Section 406 of the Sarbanes-Oxley Act 2002 which provides a back-door way for investors to force ethical corporate governance and sue public companies for malfeasance. That provision requires Senior Financial Officers, such as the CEO and CFO of public companies, to abide by a strict code of ethics which broadly defines corporate malfeasance and effectively makes…