Wednesday, April 22, 2009

Today's Overstock.com Q1 2009 Earnings Conference Call: Questions Submitted to Patrick Byrne

Updated

Overstock.com's (NASDAQ: OSTK) earnings conference call is scheduled to start on Wednesday, April 22, 2009 at 3:00 PM Eastern. Therefore, I have submitted the questions below for CEO Patrick Byrne to answer. Before asking each question, I provide the context of my questions. Let's see if the masquerading stock market reformer Patrick Byrne has the guts to provide a detailed truthful response to each and every question.

To Patrick M. Byrne:

Senior Note Repurchases

As of December 31, 2008, Overstock.com reported that $67.5 million of Senior Notes were outstanding. Those notes were issued in November 2004. Since that time Overstock.com has disclosed that there were material weaknesses in internal controls and that its revenue accounting did not conform to GAAP and SEC disclosure rules from the company’s inception (day one).

In addition, financial reports from Q1 2003 to Q3 2004 (periods before the Senior Notes were offered) have been restated twice. Recently, Overstock.com has been buying back such notes at a discount or profit by paying investors less than the face amount of such notes.

Questions:

Do you believe that investors would have purchased such Senior Notes under those same terms and conditions in November 2004, in light of Overstock.com’s subsequent disclosures about material weaknesses in internal controls, departures from GAAP and violations of SEC disclosure rules, as recently disclosed by the company?

Is it fair to say that you are taking advantage of investors in Senior Notes by buying the debt at a discount to face value?

James V. Joyce Resignation and Contract Termination Fee paid to Icent LLC (run by Mr. Joyce)

On April 1, 2009, James V. Joyce resigned from Overstock.com’s board of directors. In an 8-K report filed with the Securities and Exchange Commission, Overstock.com disclosed that Icent LLC (a company run by Mr. Joyce) received $1.2 million to terminate its contract with Overstock.com. According to the proxy statement, Overstock.com "...paid Icent LLC $360,000 annually, and paid approximately $75,187 of reimbursable expenses to Icent in 2008."

Questions:

Please describe in detail the services rendered by Icent LLC to Overstock.com. What factors justified the huge $1.2 million contract termination fee which is approximately 3.5 times annual fees paid to Icent LLC?

Is it Overstock.com’s view that its agreement with Icent LLC and any amendments thereof are considered a “material definitive agreement” under SEC rules?

Please explain in detail Overstock.com’s position of that point.

Does Overstock.com intend to disclose as an exhibit in a future filing to the SEC copies of any agreements made with Icent LLC?

Please describe any contract termination provision in any agreement with Icent LLC.

Assuming that the original contract with Icent LLC had a contract termination provision, was it ever amended?

Did the original contract with Icent LLC call for a contract termination payment of $1.2 million? If not, was it agreed to at a later time?

Did James V. Joyce or Icent LLC render any services that relate to Deep Capture LLC or antisocialmedia.net?

Smear Campaign

You have viciously retaliated against me and other brave journalists and bloggers with innuendo, smears, and lies for having the courage to expose your misdeeds. Recently, your paid internet stalker Judd Bagley posted smears, innuendo, and lies about my ongoing matrimonial action in an attempt to discredit me. He even threatened me to "settle the case." (Details here)

Questions:

Do you deny orchestrating a retaliatory smear campaign against your critics through your funding and admitted control of Deep Capture LLC, compensating individuals such as Judd Bagley and Mark Mitchell to post smears, innuendos, and lies about your critics on Deep Capture's web site and internet public chat boards?

Do you deny ever violating Overstock.com’s Code of Business Conduct and Ethics?

Please explain your answer in detail.

Do you deny ever lying or misleading investors or the public about Overstock.com’s financial performance?

Please disclose the exact nature of the relationship between Overstock.com and Deep Capture, including but not limited to any Overstock.com resources used by Deep Capture, whether past or present.

Recently, Judd Bagley who claims to be compensated by Deep Capture LLC, a company that you funded, posted innuendo, lies, and smears about my divorce on the Yahoo message boards.

Do you approve of Bagley’s behavior towards me and other critics?

Recent Amendments to Financial Reports

Overstock.com recently filed amendments to prior financial reports filed with the Securities and Exchange Commission. Each of those amendments contains an “Explanatory Note” detailing the changes in certain disclosures and the reasons for such changes.

From Q2 2007 to Q2 2008, Overstock.com violated SEC Regulation G by using a non-compliant EBITDA and the company materially overstated its financial performance. In Q3 2008, Overstock.com revised its non-compliant EBITDA disclosure and called it “adjusted EBITDA” to try to conform to SEC Regulation G. Overstock.com also revised its previously reported (Q2 2007 to Q2 2008) non-compliant EBITDA disclosures in those amended reports. However, there is no explanation why such non-GAAP disclosures were changed.

Question: Please explain why Overstock.com made no reference to using a non-compliant EBITDA in its “Explanatory Note” to amended financial reports and provided no reason for changing such non-GAAP disclosures.

Update:

Lee Webb from Stockwatch analyzes Overstock.com's responses and lack of responses to my questions (detailed 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.

Thursday, April 16, 2009

Don't criticize Overstock.com and Patrick Byrne, especially if you are going through a divorce

Updated

Divorce is hard enough. However, when the CEO of a public corporation hires a paid internet stalker to spread innuendo, smears, and lies about a company critic’s ongoing matrimonial action to discredit him, that is called issuer retaliation. I’ll just call it outright scummy. Even worse is the threat leveled at me to “settle the case” by a corporate sponsored internet stalker. I’ll get to those points, later.

The company is Overstock.com (NASDAQ: OSTK). It is a company that has not produced a single financial report in compliance with Generally Accepted Accounting Principles and Securities and Exchange Commission disclosure rules from its inception, without having to later correct them, unless such reports were too old to correct.

Throughout its history, Overstock.com has restated financial reports due to noncompliance with GAAP and SEC rules and even restated many of those same financial reports again. The company never had a profitable year and has reported accumulated losses of over $260 million to date. Now, Overstock.com is buying back senior notes at a discount or profit after it lured investors to buy such notes based on what turned out to be financial reports that violated GAAP and SEC disclosure rules.

The CEO is Patrick Byrne (pictured right), who masquerades as a stock market reformer, while pathologically lying about his company’s financial performance for about ten years. He employs a group internet stalkers including Judd Bagley, below, to intimidate, threaten, harass, blackmail, smear, slander, and defame his critics.

The paid internet stalker is the nauseating Judd Bagley, who has used multiple anonymous aliases on internet chat boards to blackmail, defame, harass, and intimidate critics of his boss, Patrick Byrne. He has implanted spyware in emails to track critics of Byrne.

Judd Bagley once ran a an anonymous blog called antisocialmedia.net with Patrick Byrne’s full knowledge and support (despite Byrne’s public denials) until New York Post reporter Roddy Boyd exposed the charade. Bagley now spews innuendo, smears, and lies directed at Byrne's critics at Deepcapture.com which is funded by Byrne. Judd Bagley works with washed up Columbia Journalism Review reporter Mark Mitchell who left CJR after evidence surfaced that he violated its journalistic integrity standards.

The critic is me. In this blog, I have documented misconduct by Patrick Byrne and his unprincipled management team going back almost ten years. Here are some examples:

CEO Patrick Byrne’s serial lies about Overstock.com’s financial performance going back to 2000. Byrne misled the public by using non-GAAP revenues to overstate revenues while lying that Overstock.com was profitable when it was not profitable (Details here).

Overstock.com’s willful non-compliance with GAAP in reporting revenues since its inception (Details here).

Overstock.com took advantage of record losses in Q4 2006 and inflated inventory reserves. Former company President Jason C. Lindsey told investors that, "we used the fourth quarter to get rid of all the slow-moving inventory. I am quite pleased with the inventory balances we have now. ...I am pleased that the fourth quarter is now over. We have sold it." However, Overstock.com later disclosed that inventory reserves had actually increased. If Overstock.com had actually sold "all the slow-moving inventory as claimed by Lindsey, there is no way that inventory reserves can increase. The company overstated its inventory reserves to create a cookie jar reserve so it could increase profits in future quarters (Details here).

Former company President Jason C. Lindsey backdated his resignation (Details here).

Company President Jonathan E. Johnson lied to Wired.com about Overstock.com’s GAAP compliance (Details here). Shortly afterwards, he subsequent sold almost $1 million in stock (Details here).

Overstock.com’s willfully violated SEC Regulation G governing non-GAAP disclosures, such as EBITDA, to materially overstate its financial performance. CEO Patrick Byrne, company President Jonathan E. Johnson, former CFO David Chidester, now demoted by the company, lied to investors about Overstock.com’s compliance with SEC Regulation G (Details here).

Overstock.com Q4 2008 violated GAAP by failing to restate prior financial reports to correct a material accounting error and instead recognized a one-time gain to show its first profit in 15 quarters (Details here).

Lee Webb from Stockwatch chronicled my year long battle with Overstock.com to successfully force the company to comply with SEC Regulation G for certain non-GAAP financial disclosures and my ongoing battle to force the company to comply with GAAP and SEC rules in reporting accounting errors (Details here).

Overstock.com paid a $1.2 million fee to Icent LLC, a company run by resigning Board Member James V. Joyce, to terminate a consulting agreement. The termination fee amounted to 3.5 years of annual fees paid to Icent. The company did not disclose the enormous contract termination fee in its press release announcing Joyce's resignation. Instead, Overstock.com left investors with the mundane task of finding out about termination fee by disclosing it in a separate SEC filing (Details here).

Patrick Byrne is a ruthless corporate bully who maliciously retaliates against his critics

Patrick Byrne has viciously retaliated against me and other brave journalists and bloggers with innuendo, smears, and lies for having the courage to expose his misdeeds. Overstock.com sued independent research firm Gradient Analytics and short seller Copper River Management, formerly Rocker Partners for questioning Overstock.com’s financial disclosures, even though the company has historically violated GAAP and SEC rules. Gradient was running out of money and settled, while Copper River has counter sued Overstock.com charging financial fraud.

Byrne even paid Bagley to stalk, threaten, and harass a teen-age blogger, Zac Bissonnette, because he did not like his blog posts criticizing his actions.

Patrick Byrne can be extremely ruthless as he vents out his vile and baseless hatred on his perceived enemies. According to a Fortune Magazine article entitled, "Phantom Menace," written by Bethany McLean, Patrick Byrne made disgusting remarks directed at both McLean and Donn Vickrey from Gradient Analytics:

Even in that successful year, there were signs that Byrne was remarkably thin-skinned. In the fall of 2004, I wrote a FORTUNE story titled "Is Overstock the Next Amazon?" After the piece came out, Byrne sent me an e-mail saying "Fair. And balanced." Two days later he wrote another e-mail: "I actually thought it was crap.... So, why exactly did you become a reporter? Giving Goldman traders blowjobs didn't work out?" Around that same time, after Gradient released another report questioning board members' independence, Byrne wrote to Vickrey: "Donn, you make a living toadying to bully hedge funds ... you deserve to be whipped, f--d, and driven from the land."

Note: Bold print and italics added by me.

In April 2007, I was researching a blog post on Patrick Byrne and his paid stalker Judd Bagley. I visited Bagley’s antisocialmedia.net multiple times over a couple of days. Using an anonymous alias "panamapump" that Judd Bagley later acknowledged was his, Bagley posted on the Yahoo Overstock.com message board each time that I visited his blog and threatened me and my family:

On behalf of your family and in the interest of your own employability I ask you to please never visit ASM again. I'll email you new articles when they come out.

Note: Bold print and italics added by me.

Judd Bagley colluded with his trusted friend Edward Manfredonia to spread vile anti-Semitic trash talk about Conde Nast contributing editor Gary Weiss and I. Manfredonia once wrote the International Herald Tribune, “Don’t judge the Nazi’s too harshly.” He has sued Gary Weiss, the Securities and Exchange Commission, and Yahoo claiming among other things delusional criminal conspiracies singling out Jews, in particular. All of those cases were thrown out of court.

Patrick Byrne even bribed of Utah Attorney General Mark Shurtleff to write a letter (issued as a press release and still posted on Overstock.com’s web site) defaming me by claiming that I made certain agreements that I never made with Shurtleff's office. I went to Utah at my own expense and took no fees to train Shurtleff’s staff on combating white collar crime. However, taped transcripts of phone conversations with Chief Deputy Attorney General Kirk Torgensen and Deputy Attorney General Richard Hamp revealed Byrne’s scheme with Shurtleff to defame and discredit me (Details here).

Judd Bagley posts innuendo, smears, and lies about my divorce in an effort to discredit me

Most recently, I have been embroiled in a divorce with my former spouse. On January 7, 2008, she requested an order of protection against me, allegations of which I have steadfastly denied. She later withdrew her application for an order of protection.

On April 8, 2009, she asked the Court for another order of protection and restraining order on new issues unrelated to the previous January 7, 2008 order of protection application that she later withdrew. The Judge denied both of her requests.

That same day, despite the above facts, Judd Bagley (pictured right) took the opportunity to use my continuing divorce proceedings to deliberately post innuendos, smears, and lies about me on the Yahoo Overstock.com chat board using anonymous alias "sweetpotatobullmacho" that he has acknowledged is his.

Referring to my former spouse's April 8, 2009 request for an order of protection and restraining order, that evening Bagley wrote (Copy here):

Actually Sam, I'm having a blast figuring out what you did to get the judge -- who knows you very well by now -- to grant your wife's request for a restraining order AND a protective order against you today.

Wow. That's quite an accomplishment.

As detailed above, and as the Court documents show, the Court did not grant my former spouse's request for a restraining order and protective order. The Judge denied both motions filed by my former spouse on that same day.

Judd Bagley tells me to "settle case" or he will "attend trial"

On April 9, 2009, Judd Bagley tried to smear me again and intimidate me into settling the divorce case or he'd "probably attend" the trial (Copy here):

Sam,

Here's another saying for you: it's not cool for a man to threaten a women. Just don't do it. Here's some advice: settle the suit...give her whatever she wants. Because if it goes to trial, I'll probably attend.

How could Bagley even imply that I threatened my former spouse, since she withdrew her January 2008 motion and the Court denied her April 2009 motions?

Finally, Bagley threatened me by saying, "settle the suit...give her whatever she wants. Because if it goes to trial, I'll probably attend." In other words, if I don't settle, Patrick Byrne's paid internet stalker will attend my trial in an attempt to humiliate and discredit me.

What on earth does my divorce have to do with Overstock.com? For what purpose would Judd Bagley threaten to attend my trial, if I don't settle?

Patrick Byrne wants Judd Bagley to intimidate me into backing down from exposing fraud and misconduct at Overstock.com.

On April 13, 2009, Judd Bagley made another post on the Yahoo message board (Copy here):

http://iapps.courts.state.ny.us/webcivil/

And one more thing: as the above link shows, Sam apparently physically threatened his wife and so a judge issued protective and restraining orders against him.

But it's ok because spinsters Darla Dumont and Michelle Hartman decided to re-define domestic abuse as a virtue, so Sam's in the clear with them.

Again, my former spouse's January 2008 application for an order of protection was withdrawn by her and her March 2009 motion for an order of protection and restraining order was denied by the Judge that same day.

The link to Court rulings, referred to by Bagley above, clearly shows that my spouse's January 2008 request for an order of protection was withdrawn and Judd Bagley knew it before he posted his libelous remarks on Yahoo (Antar motion detail copied here).

Bagley should also have known that just because a decision by the Court on my former spouse's April 2009 motions is not yet posted, it does not preclude the fact that the Judge denied her motions.

In Conde Nast Portfolio, Gary Weiss wrote about Patrick Byrne's ongoing smear campaign against his critics and Judd Bagley posting lies about my divorce case:

Byrne is famous for a 2005 rant in which he claimed that his company was victimized by an imaginary "Sith Lord," and since then he has turned Overstock into a kind of corporate Somalia. He has consistently used smoked and mirrors to minimize his company's ongoing financial trauma--as corporate crime-fighter Sam Antar has chronicled--and has flushed any concept of ethics down the toilet by using his company's website as a platform for attacking critics (myself included), and by hiring a nauseating hatchet man named Judd Bagley.

In addition to his ongoing smear campaign against critics, Byrne has perfected the art of issuer retaliation (a subject not on the SEC's to-do list) by suing investors and analysts who don't like Overstock.

It's a really down-and-dirty smear campaign. Recently one Yahoo screen name, which has claimed to be Bagley, has taken to posting lies about Antar's divorce case on the Yahoo Overstock.com message board.

I complained about Judd Bagley's vicious smears in an email to Overstock.com's Audit Committee member Joseph J. Tabacco Jr, the company's Board of Directors, and the Securities and Exchange Commission:

Issuer retaliation against a critic that has exposed false disclosures by Overstock.com is a serious issue and yet the company has done nothing to stop it and has violated its Code of Business Conduct and Ethics. Such inaction on violations are considered implicit waivers of Overstock.com’s Code of Business Conduct and Ethics and must be disclosed on form 8-K.

Hours later, I received an email from Judd Bagley acknowledging that he authored the posts (above) slandering me and saying that he might be "wrong."

From: Judd Bagley [mailto:writerjudd@gmail.com]

Sent: Wednesday, April 15, 2009 8:06 PM

To: Sam E. Antar

Subject: your divorce

So, Sam, if I've got it wrong, and the judge did not issue restraining and protective orders against you, please do tell me exactly what did happen. If I've been wrong, I'll set the record straight as well as I can.

-- Judd Bagley

801.618.8455

Rather than rely on paid internet stalker Judd Bagley, who works for serial liar Patrick Byrne to smear critics, I chose instead to set the record straight, right here.

Divorce is very painful on both spouses, especially on their children. Despite our differences, Robin was still my wife for 28 years and we have three children. Patrick Byrne and Judd Bagley should stay away from Robin and our kids. My former spouse and our kids have enough issues to deal with, without Byrne and Bagley exploiting them in a smear campaign.

Udpate 1:

True to his sleezy form, the unrepentant Judd Bagley posted more information about my divorce using his acknowledged alias De Daumier-Smith on the Investor Village Overstock.com chat board (Copy here) and asked readers for help. He still does not believe that the Judge denied my former spouse's motions the same day that they were filed:

I need a trial attorney to look at this and tell me it doesn't mean that protective and restraining orders were issued against Sam on 4/8. I've had two others tell me that's what it does say. I'd take Sam's word, but the entire planet knows what that's worth.

What on earth does my divorce have to do with Overstock.com? How does my divorce justify Overstock.com's phony financial reports and its management team's serial lies to investors?

My private divorce proceedings are irrelevant to matters relating to Overstock.com and the company's history of GAAP violations, SEC disclosure violations, management lies to investors, and management violations of its Code of Business Conduct and Ethics.

Bagley's boss Patrick Byrne is still attempting to use my divorce to punish me for my continuing exposure of frauds committed by Byrne on investors.

Message to Overstock.com CEO Patrick Byrne: Take your best shot.

Update 2:

In a new Conde Nast Portfolio article, entitled, "The Whisper Campaign Against an Overstock.com Whistleblower," investigative reporter Gary Weiss writes:

Sam is the target of an increasingly crude smear campaign openly conducted by Byrne and his paid goon, a former Florida Republican go-fer named Judd Bagley, which has recently degenerated into a whisper campaign spreading lies and innuendo about his personal life.

I've written about these nightcrawlers a great deal (they've targeted me, which tends to focus one's attention on the matter), so I can say with some authority that the latest episode in this corporate Addams Family is a new low.

Sam, you see, is engaged in a divorce battle with his wife of 28 years. I've met Mrs. Antar; she is a lovely lady and that what's happening is a tragedy. Not even the grimiest criminals, not even Mafia hoods (and I've met my share of them), would think of intruding in such an unfortunate personal spat, but keep in mind that we are dealing with a particularly loathsome group of people here.

Note: Bold print and italics added by me.

Update 3:

On April 18, 2009, Judd Bagley was asked the following question by a person on the Investor Village Overstock.com message board:

4) Antar said that within hours of contacting an OSTK board member about your protection order mistake you wrote him somewhat apologetically saying that you were willing to redress any misunderstanding. Should I take it that you will go on record that no rebuke concerning this was transmitted to you directly or indirectly by an OSTK board member? Remember Judd, if any of the people you question refuse to go on record denying something, you assume they are guilty. So I look forward to yr answer.

In his latest display of arrogance, the sleazy and unrepentant Judd Bagley offered the following excuse in a posted message using his acknowledged alias De Daumier-Smith (copy here):

Someone sent me a comment Sam had made to Gary Weiss's blog, claiming that I was wrong about the orders. This was odd as it followed a week of Sam refusing to go on record denying something, so I assumed he was guilty. My email was not "apologetic". I just wanted to pin him down.

Note: Bold print and italics added by me.

In other words, Bagley took it upon himself to assume that I was "guilty" of physically threatening my former spouse because of my refusal to comment to him (a paid internet stalker) on the private matter of my divorce. Even any journalism or law school student will tell you that a refusal to discuss the private matter of a divorce is not any evidence of guilt.

Update 4:

Recommended reading: Sam E. Antar: From Crazy Eddie to Patrick Byrne's worst nightmare by William K. Wolfrum

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.

Saturday, April 04, 2009

Overstock.com Proxy Reveals Exit Payment to Departing Director James V. Joyce's Company is Equivalent to Three and One-Half Year's Fees

Updated:

According to Overstock.com's (NASDAQ: OSTK) proxy statement filed with the Securities and Exchange Commission on Friday, April 2, the company's $1,250,000 payment to terminate a management consulting agreement with Icent LLC, a company headed by departing Board Member James V. Joyce, was 3.5 times the amount of annual fees of $360,000 paid to Icent. In other words, the company paid Icent an equivalent to three and one-half year's fees to terminate its consulting agreement.

As I described in my last blog post, on Wednesday, April 1, James V. Joyce unexpectedly resigned from Overstock.com's Board of Directors. Overstock.com failed to mention the huge $1,250,000 termination payment to Joyce's consulting firm in its press release that announced Joyce's resignation. Instead, Overstock.com left investors with the mundane task of finding out about the $1,250,000 termination payment by disclosing it in a separate SEC filing.

See Overstock.com's recent proxy disclosure below:

James V. Joyce, who served on our Board of Directors from February 2008 through April 1, 2009, also has served as a consultant to us, through Icent LLC, a management consulting company of which Mr. Joyce serves as chief executive officer, for several years. We paid Icent LLC $360,000 annually, and paid approximately $75,187 of reimbursable expenses to Icent in 2008. On January 14, 2008 we granted 15,000 restricted stock units to Mr. Joyce, at which date the market price of the common stock was $12.21. On January 13, 2009 we granted 10,000 restricted stock units to Mr. Joyce, at which date the market price of the common stock was $9.89. The restricted stock units vest over a three-year period commencing on the date of grant at the rate of 25% at the end of year one, 25% at the end of year two, and 50% at the end of year three. On April 1, 2009, we terminated our consulting arrangement with Icent LLC, and Mr. Joyce resigned from the Board. Consequently, Mr. Joyce forfeited the unvested portion of the restricted stock units previously granted to him. In connection with the termination of the Icent LLC consulting arrangement, the Company agreed to pay Mr. Joyce $1,250,000.

Note: Bold print and italics added by me.

Let's compare Overstock.com $1,250,000 termination payment to Icent LLC to other payments made by the company in 2008:

  • Fees paid to PricewaterhouseCoopers (recently replaced by Grant Thornton): $820,100
  • Total salaries paid to principal executive officer, principal financial officer, and three most highly compensated executive officers: $809,760.

Therefore, Overstock.com's $1,250,000 termination payment to Icent was about 1.5 times the amounts paid to PricewaterhouseCoopers and its five senior executive officers.

As I described in my last blog post, 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

Overstock.com CEO Patrick Byrne has not fully explained why such a large payment was made to James Joyce's consulting company or explained the exact nature of services provided by his company.

Update: Unlike other Overstock.com directors who received $60,000 in annual compensation, all fees paid for James V. Joyce's services were paid to Icent LLC, his consulting company. James Joyce was an Overstock.com board member for only about a year and two months.

If we factor out the $60,000 in annual fees that can be attributed to Joyce's services as a director, Icent LLC was paid $300,000 ($360,000 total fees minus $60,000 director fees) in annual compensation for so-called consulting services rendered to Overstock.com.

Assuming that James V. Joyce did not receive any termination fees as a board member, Overstock.com actually paid Icent LLC an equivalent to four year's fees to terminate its consulting agreement.

In addition, I have never heard of a public company paying a consulting company for services rendered by an individual as a Board Member. Other directors at the company received $60,000 in annual director's compensation paid to them. For Joyce, even that amount was paid to his consulting company. Why was $60,000 in director's compensation paid to Joyce's consulting company?

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.

Thursday, April 02, 2009

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.