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Showing posts from February, 2009

SEC Investigating after Questions Raised in This Blog about Inventory Disclosures

After the market close yesterday, (NASDAQ: BIDZ) disclosed that the Securities and Exchange Commission started a formal investigation of the company's inventory accounting practices and other matters:The Company was notified recently by the SEC of a formal investigation relating to certain aspects of its inventory accounting practices, as well as other matters. The Company intends to fully cooperate with the SEC regarding this matter. The Company remains confident its inventory accounting is correct and in full accordance with GAAP.Apparently, the SEC responded to serious questions, first detailed in this blog, about's inventory disclosures and the company's possible violation of GAAP in accounting for inventories. I had contacted the SEC Los Angeles office.For example, I examined's fiscal year 2007 10-K inventory disclosures. See below:Inventories:Inventories consist mainly of merchandise purchased for resale and are stated at the lower of f…

Two Universities Say Intrepid Potash President Patrick Avery Didn't Get Degrees Claimed in SEC Filings

Convicted felon turned fraud fighter and personal friend Barry Minkow, co-founder of the Fraud Discovery Institute (FDI) has uncovered yet another corporate executive who did not receive college degrees claimed in SEC filings. This time, a background check by FDI found that Intrepid Potash Inc. (NYSE: IPI) President and Chief Operating Officer Patrick Avery did not earn at least two of three degrees claimed in company disclosures filed with the Securities and Exchange CommissionAccording to SEC Form S-1 and later amendments, filed in connection with Intrepid Potash's initial public offering, from late 2007 to early 2008, the company disclosed:Mr. Avery holds a B.A. in Biology and Chemistry from the University of Colorado, an M.S. in Engineering from Loyola, and an M.B.A. from Pepperdine University.However, Bloomberg contacted the University of Colorado and the registrar's office confirmed Minkow's report that no B.A. degree was awarded to Mr. Avery:Avery attended the Unive… Refuses to Correct GAAP Violations in Latest Financial Report

So far, (NASDAQ: OSTK) has stubbornly refused to correct recent Q4 2008 GAAP violations, exposed last week by this blog that allowed the company to improperly report a $1 million profit, rather than an $800,000 net loss. Instead on last Friday, CEO Patrick Byrne was caught trying to make excuses to readers on a stock bulletin board, using an alias in an unsigned post. After I complained in emails to the company and the Securities and Exchange Commission, Byrne removed his unsigned post and posted the same nonsense with his real name attached to it. I'll have more to say on that, violated accounting rules to report first quarterly profit after 15 consecutive quarterly lossesIn my last blog post, I documented how violated Statement of Financial Accounting Standards No. 154 governing accounting errors and improperly reported a $1 million profit in Q4 2008, rather than an $800,000 net loss. During the Q4 2008 earnings call,… and CEO Patrick Byrne Violate Accounting Rules in Q4 2008 Financial Report

Latest GAAP Violations by in Q4 2008 Financial Report Improperly Turn a Loss into a Profit

Last Friday, (NASDAQ: OSTK) reported a fourth quarter 2008 net profit of $1 million dollars. CEO Patrick Byrne proudly told investors, "After a tough three years, returning to GAAP profitability is a relief." However,'s "returning to GAAP profitability" was simply accomplished by the company violating GAAP through its failure to restate prior period financial reports effected by a certain accounting error. Had properly followed acounting rules, it would have reported an $800,000 loss instead of a $1 million profit.

During the Q4 2008 earnings call, the new CFO Steve Chesnut, who recently replaced David Chidester, told investors:
Gross profit dollars were $43.6 million, a 6% decrease. This included a one-time gain of $1.8 million relating to payments from partners who were under-billed earlier in the year.