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Showing posts from September, 2012

Green Mountain Coffee Roasters’ Growing Inventory Levels: Is It a Fumble or a Fraud?

Has Green Mountain Coffee Roasters (NASDAQ: GMCR) fumbled in managing its inventory or has it engaged in an inventory fraud to inflate earnings?

Background

As the criminal CFO of Crazy Eddie, I learned that the overstatement of inventory levels was the easiest way to inflate earnings. Auditors don't always supervise the counting of each and every physical inventory item to confirm their existence. Even if the auditors confirm the physical existence of all inventory items, they don't always trace how every single item arrived in a company's storage facilities. Therefore, the same inventory items can be moved from location to location and counted several times to inflate earnings.

In September 2010, the Securities and Exchange Commission started a probe of Green Mountain Coffee's revenue accounting practices. Shortly afterwards, a class action lawsuit was filed against the company alleging that it engaged in securities fraud by inflating its inventory numbers to overstat…

Lawsuit Filed Against ZAGG Alleges It Concealed Stock Pledges

Last Thursday, a lawsuit seeking class action status was filed against ZAGG (NASDAQ: ZAGG) Incorporated, certain members of its board of directors, and certain officers of the company. It alleges that they violated federal securities laws by improperly concealing certain stock pledges made by ZAGG’s former CEO and Chairman Robert J. Pedersen. Other law firms who specialize in bringing class action lawsuits have announced that they are contemplating filing complaints against ZAGG. (Download the complaint here).

ZAGG makes protective coverings for Apple's (NASDAQ: AAPL) iPhone and iPad and other devices. Big-box retailers such as Best Buy (NYSE: BBY) and Walmart (NYSE: WMT) carry ZAGG's product.

Background

On Friday August 17, 2012 ZAGG issued a press release saying that its co-founder Robert Pedersen resigned from his posts as CEO and Chairman. It did not mention any reason for his resignation. Later that day, Robert Pedersen was interviewed by the Salt Lake Tribune and it repor…

Real Estate Investor Who Fled Country Now Seeks to Raise $1 Billion in IPO

United Realty Trust Incorporated is seeking up to $1 billion of capital from investors in an initial public offering (IPO). Deep inside the prospectus on pages 89 and 90 is a startling disclosure about Eli Verschleiser, its President and member of its Board of Directors:

At the age of 17, while a high school student, Eli was subpoenaed to appear before a federal grand jury inquiring into the fraudulent activities of a group of individuals he knew. Eli exercised his Fifth Amendment rights and continued to do so after being given “use immunity.” Eli appeared before a federal judge who directed him to reappear. He did not reappear and, instead, moved overseas, where he remained for several years. While overseas, a federal indictment was unsealed naming over 20 individuals in connection with fraudulent activities, including Eli. Approximately two years later, his family contacted an attorney to help him return to the country. He eventually pleaded guilty to one count of failure to appear…