Today, Medifast (NYSE: MED) announced that Bagell, Josephs, Levine & Company, LLC (BJL) resigned effective January 22, 2010 as the company's independent auditors. BJL had merged with Friedman LLP on January 1, 2010 and Friedman was engaged as Medifast's new auditors. The company claims that:
During the two years ended December 31, 2008 and from December 31, 2008 through January 21, 2010, there were no (i) disagreements between the Company and BJL on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to its satisfaction, would have caused BJL to make reference to the subject matter of such disagreements in connection with its report, or (ii) “reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K.
On January 25, 2010, Medifast announced its unaudited Q4 2009 financial results, but failed to disclose the resignation of BJL as its auditors and Friedman taking over as the company's auditors, three days earlier. That day, the stock shot up $2.36 to close at $21.24 per share. Would the stock have popped up if investors knew what Medifast already knew three days earlier? Before I initially posted my blog today at 2:16 PM ET, Medifast's stock was down $2.10 per share and trading at $18.43 per share in reaction to BJL resigning and Friedman LLP taking over as auditors.
Note: In an earlier version of this blog post, I neglected to mention that Friedman succeeded BJL as Medifast's auditors due to my misreading of the company's 8-K and I apologize for the error.
I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes, simply because I could.
If it weren't for the efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.
I do not own Medifast securities short or long. From time-to-time, I do research on scam companies for Fraud Discovery Institute which has been critical of Medifast's business model and financial disclosures. Barry Minkow is a short seller.
Sam E. Antar