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Showing posts from June, 2009

Bidz.com Auditors Cited by PCAOB in Five of Thirteen Audits Sampled

Bidz.com (NASDAQ: BIDZ) should seriously consider replacing Stonefield Josephson Inc. as its auditors. According to a March 2007 Public Company Accounting Oversight Board (PCAOB) Inspection Report, Stonefield Josephson, Inc. was cited for significant deficiencies in five of thirteen audits reviewed or about 38.5% of audits sampled. See below:The scope of the inspection procedures performed included reviews of aspects of the performance of 13 of the Firm's audits of the financial statements of issuers. Those audits and aspects were selected according to the Board's criteria, and the Firm was not allowed an opportunity to limit or influence the selection process. The inspection team identified matters that it considered to be audit deficiencies.The deficiencies identified in five of the audits reviewed included deficiencies of such significance that it appeared to the inspection team that the Firm did not obtain sufficient competent evidential matter to support its opinion on th…

InterOil Files False Disclosures With SEC (Redacted Version)

Note: My previous blog post was deleted by me and replaced by this redacted version because it included certain sensitive information that I subsequently decided to sent to law enforcement. InterOil (NYSE: IOC) filed a deliberately false Form D with the Securities and Exchange Commission relating to a May 2008 $95 million private placement convertible debt offering and tried to conceal material details of the transaction in later regulatory filings. Worst yet, Wayne Kaufman of John Thomas Financial, a New York based brokerage firm and a party to the private placement, failed to make conflict of interest disclosures while appearing on CNBC and pumping Interoil’s future prospects.The above revelations resulted from a month long investigation by convicted felon turned fraud fighter and short seller Barry Minkow (co-founder of the Fraud Discovery Institute) with key assistance from veteran securities litigator Howard Sirota, and additional research by me.The information was pieced togethe…

Memo to President Barack Obama from a Convicted Felon: Be Prepared For an Unprecedented Onslaught of White Collar Crime

To President Barack Obama:Within a couple of years, you can expect a massive crime wave on an unprecedented scale resulting from spending trillions of extra taxpayer dollars to stimulate the economy and bail out the financial sector in a relatively brief period of time. Not enough attention is being paid to effective internal controls to prevent such crimes. The FBI and other law enforcement agencies do not have enough resources to effectively investigate and prosecute such crimes.The Republicans will run against you on a simple platform, “The Democrats are responsible for white collar crime, corruption, and waste on an unprecedented scale.” The Republicans will say that you should have cut taxes and simplified the tax system to stimulate the economy and reduce the incentive for criminals to commit fraud.According to the Wall Street Journal:The Federal Bureau of Investigation is braced for a potential crime wave involving fraud and corruption related to bank bailout money and the econ…

Children's Place Violates SEC Regulation G Governing Non-GAAP Financial Measures

The Children’s Place (NASDAQ: PLCE) is violating Securities and Exchange Commission Regulation G governing non-GAAP financial measures in its financial reports. In its most recent earnings release for Q1 2009, Children’s Place reported a non-GAAP financial measure known as “Adjusted income from continuing operations net of income taxes” which is computed by eliminating certain “unusual or one-time items” less the related income tax effect from “Income from continuing operations net of income taxes.” However, as I will detail below, SEC Regulation G prohibits:…adjusting a non-GAAP performance measure to eliminate or smooth items identified as non-recurring, infrequent or unusual, when (1) the nature of the charge or gain is such that it is reasonably likely to recur within two years, or (2) there was a similar charge or gain within the prior two years.Note: Bold print and italics added by me.Two such "items identified as non-recurring, infrequent or unusual" by Children's…