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Showing posts from May, 2011

Are the Feds Going Insane?

Memo to White-Collar Criminals:

If the Feds come knocking, just tell them that you will conduct an “internal investigation” into your suspected wrongdoing. They may be gullible enough to believe whatever you report. At worst, you can throw them some crumbs and admit to some mistakes to avoid a wider investigation into your unlawful activities. I'm not kidding!

Sam E. Antar (Convicted Felon, Graduating Class of 1992)

Sarcasm aside, back in my criminal days at Crazy Eddie, we pulled that stunt on our auditors at Peat Marwick Main (now KPMG). They were dumb enough to believe the results of our internal investigation clearing us of wrongdoing. Now it seems that in certain instances, the Feds are drinking the same Kool-Aid as Crazy Eddie's former auditors. It's INSANE!

Yesterday, David S. Hilzenrath from the Washington Post reported:
As the U.S. government steps up investigations of companies suspected of paying bribes overseas, law enforcement officials are leaving much of the d…

California Court Compels Overstock.com to Turn Over Contact Information of Former Employees to District Attorney Investigating Consumer Fraud

Yesterday, a California Superior Court Judge granted a motion filed by the Alameda District Attorney to compel Overstock.com (NASDAQ: OSTK) to turn over personal contact information of former employees with possible knowledge of alleged fraudulent pricing practices by the company. The District Attorney had complained to the Court that Overstock.com "refused" to provide them with the present or last known contact information of certain former employees who are viewed as "potential witnesses" in the investigation.

On November 17, 2010, District Attorneys from seven California counties sued Overstock.com (NASDAQ: OSTK) alleging that it engaged in fraudulent pricing practices after a two year investigation. The District Attorneys are seeking at least $15 million of restitution, fines, penalties, and cost reimbursements from Overstock.com. (Download a copy of the lawsuit). The lawsuit alleged that:
9. ...Overstock routinely and systematically made untrue and misleading co…

Is Green Mountain Coffee Roasters Shuffling the Beans to Beat Earnings Expectations?

Note: Updated On June 6, 2011 here

On May 3, 2011, Green Mountain Coffee Roasters (NASDAQ: GMCR) beat analysts' earnings estimates by $0.10 per share for the thirteen-week period ended March 26, 2011. The next day, the stock price had risen to $11.91 per share to close at $75.98 per share, a staggering 18.5% increase over the previous day's closing stock price. CNBC Senior Stocks Commentator Herb Greenberg raised questions about the quality of Green Mountain Coffee's earnings because its provision for sales returns dropped $22 million in the thirteen-week period. He wanted to know if there was a certain adjustment to reserves ("a reversal") that helped Green Mountain Coffee beat analysts' earnings estimates. However, the company was not available to comment. It was too busy on a road show trying to sell more stock. Therefore, I will provide an analysis and some answers to questions below. (Video link to Herb Greenberg's comments.)



Provision for sales retur…

Green Mountain Coffee Roasters: Do they know how to count the beans?

Updated at 5:35 PM and 12:42 AM (5/5), please see bottom of post for additional issues

Does anyone at Green Mountain Coffee Roasters (NASDAQ: GMCR) know math or accounting? Seriously, does anyone in their accounting department know how to count the beans?

On September 28, 2010, Green Mountain Coffee disclosed that the SEC started an informal inquiry into its accounting practices eight days earlier. On that same day, the company reported an accounting error involving its K-Cup margin percentages. On November 19, 2010, Green Mountain Coffee disclosed four new accounting errors. On that date, the company said it would restate its financial reports issued from 2007 to the quarter ended 2010 to correct its errors.

Before the restatement of accounting errors, Green Mountain Coffee issued a 10-Q report for the quarter ended December 26, 2009 and disclosed the following financial results for Timothy’s:
For the thirteen-weeks ended December 26, 2009, Timothy’s contributed approximately $7,141,000…