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Showing posts from July, 2014

Do Nu Skin Inventory Red Flags Spell Trouble Ahead?

Last Friday morning, a comment posted on Twitter by Marc Cohodes about Nu Skin Enterprises (NYSE: NUS), a Utah based multi-level marketing company, caught my curiosity. Cohodes is a legendary short-seller with an excellent track record and looks for "fads, frauds, and failures" involving public companies. He wrote, "The Clown who runs NUS tried to squeeze shorts. Screw him! He will get what's coming to him in spades one day. Too much Inventory is an issue." Afterwards, I decided to take a close look at Nu Skin's financial reports. So far, my first issue is that management's explanation for its massive increase in inventory levels does not square against its own historical numbers, guidance it gave to investors, and analysts' consensus estimates. In addition, Nu Skin may be have to take significant margin reductions to unload its excess inventory and possibly have to recognize a material impairment charge against inventory in a future period.

Backgro…

Indicted Former Utah Attorney General Mark Shurtleff was bribed by Overstock.com too

My experience in dealing with former Utah Attorney General Mark Shurtleff goes way back. On October 30, 2007, Overstock.com (NASDAQ: OSTK) paid him $5,000 purportedly as a "campaign contribution." Two weeks later, Overstock.com issued a press release together with a defamatory "open letter" written by Shurtleff making baseless allegations against me. It was no coincidence. Instead it was a blatant effort by its CEO Patrick Byrne to get me to back off from investigating securities law violations and other illegal conduct by him and his company.

It was only a matter of time before the law caught up with Mark Shurtleff's pattern of soliciting and receiving illegal bribes in return for favors. Yesterday, he was arrested by FBI agents and local law enforcement along with another former Utah Attorney General John Swallow. The charges yesterday concern other donors, not Byrne. He may be protected by the statute of limitations, or maybe not. His behavior needs to be e…

A Felon’s View of White-Collar Crime - Why Society is Very Vulnerable to Fraud

White-collar crime is more brutal than violent crime. The actions of one or a few corrupt public officials and corrupt businessmen can affect the livelihoods of thousands, even millions of people. Fraudsters use a combination of persuasion and deceit to execute their crimes. Unfortunately, most people are unaware of how easy it is for fraudsters prey on their behavioral and cognitive vulnerabilities. Furthermore, the amount of prosecutions of white-collar criminals recommended by the FBI has steadily declined over the last 20 years. The government devotes far more resources to battling street crime than white-collar crime. The current framework involving, compliance, audits, and law enforcement does little to protect investors from fraud.

Every person is capable of doing white-collar crime. At the 22nd Annual Conference of the Association of Certified Fraud Examiners Conference in San Diego California in 2011, Joan Pastor, PhD, Clinical Psychologist and Fraud Expert said, “We’re all c…