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Showing posts from October, 2010

Interesting Issues in Timing of Green Mountain Insider Stock Sales and Disclosure of SEC Inquiry

Interesting timing

On Monday, September 20, 2010, Green Mountain Coffee Roasters (NASDAQ: GMCR) was notified of a Securities and Exchange Commission informal inquiry and request for voluntary information concerning “revenue recognition practices and the Company’s relationship with one of its fulfillment vendors.”

On Tuesday, September 21, 2010, executive officer Michelle Stacy exercised 5,000 options and immediately sold her shares at $37 per share. Of the 5,000 shares bought and sold, options for 4,375 shares did not expire until November 3, 2018 and options for 625 shares did not expire until March 12, 2019. What was the urgency in exercising her options so soon?

After the stock market closed on September 28, 2010, Green Mountain finally disclosed the SEC inquiry to investors in an 8-K filing which included certain other material disclosures.

On September 29, 2010, Green Mountain stock dropped $5.95 per share to close at $31.06 per share, a 16.1% drop in market value that day.

Accor…

Does Overstock.com CEO Patrick Byrne Know When to Shut Up, Especially While the SEC Investigates his Company?

During an ongoing SEC investigation into financial reporting violations by a public company, competent lawyers will advise management that the wisest course of action is to simply shut up. Not so, with Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne. He does not know when to stop blabbing away, misleading investors, and lying to the media – even during an ongoing SEC investigation of his antics.

For example, in 2009, I correctly reported in my blog that Overstock.com violated Generally Accepted Accounting Principles (GAAP) in accounting for its recoveries of certain offsetting costs and reimbursements amounts due to the company from its fulfillment partners (suppliers) who were under-billed in previous reporting periods, from Q1 2007 to Q 2 2008. Overstock.com should have restated its financial reports to recognize income when those offsetting costs and reimbursements were actually earned by the company in those previous reporting periods.

Instead, the company improperly recogniz…

Crazy Eddie Documentary: How We Screwed the Government, Wall Street, Investors, Consumers, and Everyone Else

We were cold-blooded ruthless crooks who committed our crimes for fun and profit. Former Wall Street Journal columnist Herb Greenberg once asked me during an interviewwhy we did it.

My response:
We committed crime simply because we could. Criminologists like to analyze white collar crime in terms of the 'fraud triangle' -- incentive, opportunity, and rationalization. We had no rationalization. Simply put, the incentive and opportunity was there, but the morality and excuses were lacking. We never had one conversation about morality during the 18 years that the fraud was going on.
Why is the world safer for criminals?

Unfortunately, our policy makers in Washington and even Crazy Eddie's former auditors still apparently have not learned any lessons from the past and continue to make white-collar crime easy for the criminals. For example, the Dodd-Frank Act watered down Sarbanes-Oxely by exempting small companies from internal control audits. Crazy Eddie would have been exempt…

Will KPMG Ever Wake Up and Finally Learn Its Lesson after Being Duped into Completing Crazy Eddie’s Audits Too Early Twenty Three Years Ago?

Sometimes I wonder what it will take for major accounting firms like KPMG to finally wake up and learn the lesson of how criminal management teams dupe them into signing off on clean audit opinions before completing the field work, just as I did as the criminal CFO of Crazy Eddie back in the day.

KPMG cited by British authorities for prematurely signing off on audits

Recently, Adam Jones of the Financial Times reported that KPMG was “rapped for signing off on audits” before the completion of field work by the United Kingdom’s Financial Reporting Council:
KMPG has been rapped over the knuckles by the accounting watchdog for signing off on audits before all necessary work had been completed.

The criticism was made by the Financial Reporting Council as it told Deloitte, Ernst & Young, KMPG and PwC, the four biggest auditors, to do more to avoid conflicts of interest and be more sceptical of management claims.

The annual evaluations of the Big Four auditors comes amid increased regul…