Overstock.com Facing Dismal Fourth Quarter Numbers?

Yesterday, Overstock.com (NASDAQ:OSTK) disclosed that it was forced to pay off its existing obligations under a Master Lease Agreement with U.S. Bank to avoid an anticipated default under its covenants on December 31, 2011. So far, Overstock.com has lost $16 million in the first nine months of the year compared to only a $1.1 million loss during the previous year's nine month period. The termination of the Master Lease Agreement by Overstock.com to avoid a pending default appears to confirm that it will report dismal fourth quarter 2011 numbers.

According to the 8-K report filed with the Securities and Exchange Commission after the market closed on December 28, 2011:

On December 27, 2011 Overstock.com, Inc. (the “Company”) and U.S. Bancorp Equipment Finance, Inc. — Technology Finance Group (“Lessor”), agreed to terminate a Master Lease Agreement, dated September 17, 2010 (“Master Lease Agreement”) and all related schedules. The Company paid approximately $20.1 million to Lessor in connection with the amendment and agreement to terminate the Master Lease Agreement, including approximately $1.2 million in prepayment premiums. The aggregate amount the Company paid to amend the Master Lease Agreement and terminate the schedules associated with the Master Lease Agreement was less than the amount the Company would have been required to pay over the scheduled life of the Master Lease Agreement and all related schedules. By this transaction, the Master Lease Agreement was first amended to eliminate all financial covenants, effective immediately. Lessor also committed to convey to the Company all of the equipment and other assets covered by the Master Lease Agreement for no additional consideration.

The Company amended the Master Lease Agreement in order to eliminate the total fixed charge coverage ratio covenant under the Master Lease Agreement. As disclosed in the Company’s Form 10-Q for the quarter ended September 30, 2011, based on the Company’s results for the first three quarters of 2011, management considered it likely at that time that the Company would be out of compliance with the Master Lease Agreement’s total fixed charge coverage ratio covenant at December 31, 2011. In order to avoid a covenant violation, the Company amended the Master Lease Agreement to eliminate the financial covenants.

Lessor is an affiliate of U.S. Bank National Association (the “Bank”). The Company has a $20 million cash-secured credit facility with the Bank. The Bank or its affiliates have also provided other commercial services to the Company from time to time. [Emphasis added.]

Overstock.com tried to spin its termination of the Master Lease Agreement as positive news by claiming that the amount paid to US Bank was “was less than the amount the Company would have been required to pay over the scheduled life of the Master Lease Agreement and all related schedules." However, the company apparently agreed to pay the full obligation of $18.9 million that was due under the Master Lease Agreement as of December 31, 2011 plus applicable taxes and a stiff $1.2 million prepayment penalty. It was unable to restructure its Master Lease Agreement and obtain less stringent terms from U.S Bank.

As of September 30, 2011, OSTK owed US Bank $20.329 million under the Master Lease Agreement. $1.428 million of that amount was payable during the quarter ending December 31, 2011. (See Quarter Ended September 30, 2011 10-Q report page 17). Therefore, Overstock.com would have owed US Bank $18.901 million as of December 31, 2011 ($20.329 million less $1.428 million). The prepayment penalty amounts to approximately 6% of Overstock.com's obligation to U.S. Bank under the Master Lease Agreement as of December 31, 2011. That prepayment penalty will be reflected as charge to its otherwise expected dismal fourth quarter financial results. Furthermore, the company will have to take additional depreciation charges in future periods since it will take title to the equipment and other assets covered under the Master Lease Agreement.

Liquidity problems

As of September 30, 2011, Overstock.com reported that it had only $18.4 million in working capital. However, the company would have reported a mere $1.4 million of net working capital (current assets minus current liabilities) had it not played a shell game and window dressed its balance sheet during the third quarter.

On September 21, 2011, Overstock.com borrowed $17 million under a separate Financing Agreement (line of credit) with U.S. Bank and used $7.5 million of internal cash to redeem $24.5 million of convertible debt before its December 1, 2011 due date (10-Q report page 16 and 33). The convertible debt was classified on the company's balance sheet as a current liability. The $17 million that it borrowed under its Financing Agreement (line of credit) is a long term debt (noncurrent liability) because payment is due on December 31, 2012 (10-Q report page 42). Had Overstock.com not borrowed that $17 million from U.S. Bank to redeem its convertible debentures before the end of the third quarter (September 30, 2011), it would have ended the quarter with a mere $1.4 million in working capital (current assets less current liabilities). In any case, its balance sheet window dressing is temporary, since the $17 million it borrowed will become a current liability by the end of the first quarter of 2012 (March 31, 2012) which is traditionally a weak quarter for the company.

As of December 31, 2011, $12.959 million of Overstock.com's $18.901 million obligation under the Master Lease Agreement would have been classified as a long term liability. Since the company paid $20.1 million, including a $1.2 million prepayment penalty to terminate the Agreement, its working capital was apparently depleted by another $7.1 million ($20.1 million less $12.959 million).

In December 9, 2011, Overstock.com filed a shelf registration statement with the Securities and Exchange Commission that would allow it to sell up to $200 million of its debt securities, common stock, warrants and other securities. It appears likely that Overstock.com will need to do some sort of equity related offering in the first quarter of 2012 to stay afloat and avoid further liquidity problems. Such an offering will likely significantly dilute the value of existing common shares. (See Davian Letter "Overstock.com is Overstocked.")

On December 14, 2011, the company unloaded millions of dollars of excess inventory in a public auction and generated a mere $150,000 in cash, just pennies on the dollar.

Other issues

Patrick Byrne

Overstock.com also has to contend with an ongoing investigation by the Securities and Exchange Commission into securities law violations after this blog exposed it fabricating its earnings numbers. So far, every single financial report issued from its inception in 1999 to the third quarter of 2009 had to be restated up to three times due to violations of Generally Accepted Accounting Principles.

The company is being sued by District Attorneys from seven California District Attorneys who are alleging consumer fraud. They are seeking at least $15 million of restitution, fines, penalties, and cost reimbursements from the company for allegedly defrauding consumers. The Judge in that case had to compel an uncooperative Overstock.com to turn over information to the California District Attorneys.

Earlier in the year, Google penalized Overstock.com because it improperly gamed its search algorithm to boost its search rankings.

In October 2011, Overstock.com CEO Patrick Byrne, his hedge fund High Plains Investments LLC, Deep Capture LLC, and Mark Mitchell, a writer for Deep Capture, were sued in a Canadian court for defamation. Deep Capture LLC is an affiliate of Overstock.com and its website was used to promote Byrne's delusional conspiracy theories and libel company critics.

Latest deceptions

Back in January 2011, Overstock.com changed its name to O.co and directed its customers to use the O.co domain. As late as September 30, 2011, Patrick Byrne claimed in a press release that, "Our customers associate 'O' with Overstock.com, which made the transition to O.co seamless."

However, in the third quarter ended September 30, 2011, Overstock.com reported a $7.8 million loss compared to a $3.4 million loss in the previous year's quarter. Revenues during that quarter had declined by 2% to $239.7 million from $245.4 million dollars in the previous year. The company revealed that, "We also believe that our current efforts to rebrand ourselves from Overstock.com to O.co may have contributed to the decline in revenue." (See 10-Q page 33). Apparently, Overstock.com's transition to O.co was not as "seamless" as previously claimed by Byrne at the end of that same quarter. During a conference call with analysts, Patrick Byrne now admitted that customers found the transition was "confusing."

Jonathan Johnson

On November 14, 2011, Ad Age reported that the company's president, Jonathan Johnson also backpedaled on remarks made by Byrne at the end of its third quarter:

The online retailer's president, Jonathan Johnson, said it is stepping back from the O.co name "for now," though not abandoning it outright...."

Confused? So were customers. Mr. Johnson said customers responded well to the O.co advertising, but after watching the spots, "a good portion" of those who sought out the website went to O.com, instead of O.co. (O.com is one of the off-the-market single letter domain names still held by ICANN.)

"We were going too fast and people were confused, which told us we didn't do a good job," Mr. Johnson said.

Marketing Magazine put Overstock.com's rebranding efforts at the top of its list of 2011 marketing blunders.

Worst customer service in 2011

Just yesterday, the Huffington Post reported that, “The site with the dubious honor of proffering the worst customer service in 2011 was Overstock.com, those ubiquitous merchants of discounted furniture, clothes and home furnishing.”

Byrne sold shares before decline

Yesterday, Overstock.com common stock closed at $7.77 per share. Back on May 20 to May 24, 2010, Patrick Byrne's 100% controlled High Plains Investments LLC dumped 140,000 company shares at an average price of $22.11 per share and collected over $3 million in proceeds. Despite Byrne's optimistic forecasts, the company surprised investors and failed to meet analysts' consensus earnings expectations in the quarter ended June 30, 2010. Since the time Byrne has sold his stock, Overstock.com’s shares have dropped about 65% in market value and its market capitalization has dropped approximately $330 million.

Written by,

Sam E. Antar

Recommended Reading

Seeking Alpha: Green Mountain Coffee Roasters Surpasses Overstock.com As Worst Stock of 2011, By Gary Weiss

Disclosure

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.

If it weren't for the heroic 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.

There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them as an independent whistleblower. I teach white-collar crime classes for various government entities, professional organizations, businesses, and colleges and universities.

I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time. My past sins are unforgivable.

I do not own any Overstock.com securities long or short.

Open Letter to KPMG: The Ties That Bind Overstock.com and Patrick Byrne With Deep Capture LLC

To KPMG:

You must investigate Overstock.com’s (NASDAQ: OSTK) relationship with Deep Capture LLC as part of your continuing audit of the company and take steps to require management to make disclosures under Statement of Financial Accounting Standards No. 57 (SFAS No. 57) governing "Related Party Disclosures."

At the direction of Overstock.com CEO Patrick Byrne, the company has used Deep Capture's resources, such as its web site, as a conduit to intimidate, harass, threaten, smear, and pre-text company critics. For example, Deep Capture Managing Partner Judd Bagley violated Facebook's Statement of Rights and Responsibilities and deceptively posed as "Larry Bergman" in an effort to gather personal information and spy on Overstock.com 's and Patrick Byrne's critics, including me (See Item 3 Safety and Item 4 Registration and Security).

Altogether, Judd Bagley posted on DeepCapture.com the names of 7,483 "Facebook friends" of Patrick Byrne's critics and that list included spouses, minor children, and other people that have nothing to do with Overstock.com, Patrick Byrne, or Byrne's delusional short selling conspiracy theories. Judd Bagley, posing as an imposter, even tried to "Facebook friend" minor children!

Note: For additional details, please read Gary Weiss blog, Felix Salmon's Reuters blog, and Barry Ritholtz's The Big Picture blog.

Overstock.com fails to make material related party disclosures

In a recent "unreviewed" Q3 2009 10-Q report filed with the SEC, Overstock.com claimed the following risk factor:

We and our chief executive officer, Patrick M. Byrne, have from time to time made public statements regarding our or his beliefs about matters of public interest, including statements regarding naked short selling. Some of those public statements have been critical of the Securities and Exchange Commission and other regulatory agencies. These public statements may have consequences for us, whether as a result of increased regulatory scrutiny or otherwise.

If the above claimed risk factor is actually for real, Overstock.com has failed to disclose a more likely and significantly more material risk factor: the fact that certain predatory and retaliatory actions taken by Deep Capture managing partner Judd Bagley, such as pre-texting of company critics, at the direction and blessing of Patrick Byrne may lead to "increased regulatory scrutiny" of the company and significant material legal liabilities in the future. To date, Overstock.com has not disclosed to investors its close financial relationship with Deep Capture LLC anywhere in financial reports filed with the Securities and Exchange Commission.

SEC Staff Accounting Bulletin No. 99 (SAB No. 99) "Materiality" notes that:

The Supreme Court has held that a fact is material if there is –

a substantial likelihood that the . . . fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.

As I will describe below, investors relying on Overstock.com's financial reports are being kept in the dark about the relationship between Overstock.com and Deep Capture LLC and the potential material legal consequences of the company's use of Deep Capture as a platform to attack its critics. Deep Capture LLC is in substance an affiliate of Overstock.com and is in substance controlled by the company, despite certain legal maneuvers made to disguise the true nature of the relationship between the entities. First, let's review certain accounting standards on "related party disclosures."

Related Party Disclosures under Generally Accepted Accounting Principles (GAAP)

Statement of Financial Accounting Standards No. 57 (SFAS No. 57) entitled "Related Party Disclosures" provides some "examples of related party transactions" such as:

transactions between... (d) an enterprise and its principal owners, management, or members of their immediate families; and (e) affiliates.

SFAS No. 57 defines an affiliate as:

A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an enterprise.

In addition, SFAS No. 57 defines control as:

The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an enterprise through ownership, by contract, or otherwise.

Furthermore, SFAS No. 57 defines related party transactions to include "services received or furnished" between such related entities. Deep Capture LLC furnishes services to Overstock.com in the form of retaliation against company critics.

How Patrick Byrne tried to conceal his control Deep Capture LLC

On April 17, 2008, investigative journalist, bestselling author, and blogger Gary Weiss reported that Deep Capture LLC is controlled by High Plains Investments LLC which is 100% owned by Patrick Byrne and owned 23.5% of the Overstock.com's common shares (See Proxy Report). See the filing below (Click on image to enlarge):

Later in his blog post, Gary Weiss noted that the Deep Capture website was registered by Patrick Byrne and is "operated over Overstock servers." See below (click on image to enlarge).

On June 19, 2008, Gary Weiss reported that Patrick Byrne took steps to conceal his ownership and control of Deep Capture by substituting High Plains Investments LLC as a principle with two former Overstock.com employees: Judd Bagley and Evren Karpak. See the filing below (Click on image to enlarge):

In addition, Patrick Byrne anonymized Deep Capture's registration. However, Deep Capture's website was still hosted on Overstock.com's servers. See below (click on image to enlarge):

Sometime later, Overstock.com servers stopped hosting the Deep Capture web site.

Financial relationship between Overstock.com, Patrick Byrne, and Deep Capture LLC

Most, if not all, of the funding for Deep Capture LLC comes from Overstock.com which is controlled by Patrick Byrne and directly from Byrne himself. As I described above, two of its managing partners, Judd Bagley and Evren Karpak, are former Overstock.com employees. Patrick Byrne claims to moonlight as a "journalist" for Deep Capture. Mark Mitchell has described Byrne as a "business associate."

Currently, Deep Capture claims that:

The Deep Capture website was created to bypass the “captured” institutions that mediate our nation’s discourse. It was initially funded by Patrick Byrne, CEO of Overstock.com, but it is not part of Overstock. It functions as a separate, limited liability media company, whose co-owners and managers are Judd Bagley, Evren Karpak, and Mark Mitchell.

Overstock.com's heavily promotes DeepCapture.com on its website. Deep Capture receives commissions from customers who purchase merchandise from Overstock.com through referrals from its website to the company. However, such income from Overstock.com is not enough to fund Deep Capture's operations. Apparently, Patrick Byrne funds Deep Capture's operating deficit.

A January 12, 2010 article in the New York Observer quoted Patrick Byrne as saying:

I put in about $500,000, and I think I made one additional smaller infusion.

 
Examples of how Overstock.com and Patrick Byrne use Deep Capture as a platform to attack critics of the company

On October 31, 2009, I sent Patrick Byrne an email and asked to participate in Overstock.com’s Q3 2009 earnings call, so I could ask questions about Overstock.com's violations of GAAP and other SEC disclosure rules. In response, Patrick Byrne responded with an angry anti-Semitic diatribe, called me a “gonif” (Hebrew/Yiddish word for thief), and posted my email on the Deep Capture website, despite previous claims that Deep Capture is unrelated to Overstock.com (See Gary Weiss blog for more details).

On November 18, 2009, I sent Patrick Byrne another email asking to participate in Overstock.com's Q3 2009 conference call where it was going to discuss its filing of an "unreviewed" 10-Q. Again, Byrne posted my email on his Deep Capture site and again referred to me as a "gonif."

On January 13, 2010, investigative journalist Roddy Boyd sent Patrick Byrne an email asking him about Overstock.com's failure to make certain material disclosures about its cash problems and internal control problems. In addition, Boyd asked Byrne about Overstock.com's New York sales tax dodge known as "Operation heist and freeze." See Roddy Boyd's article in The Big Money here).

Byrne responded by posting Boyd's emails on Deep Capture's web site and posted the following tantrum (click on image to enlarge):

If Deep Capture is "not part of Overstock" as it claims:

1. Why did Patrick Byrne post on the Deep Capture web site my emails to him asking to participate in various Overstock.com conference calls and personally attack me with anti-Semitic slurs?

2. Why did Patrick Byrne have to respond to Roddy Boyd's requests for information on Overstock.com's failure to disclose certain material information and a tax dodge scheme by posting his vile rant on Deep Capture?

Certainly, the above issues relate to Overstock.com.

Judd Bagley has refused to answer my emailed questions (cc'd to the SEC) asking him as a "Managing Partner" whether or not and he or others approve Patrick Byrne's blog posts prior to publication on DeepCapture.com. In addition, Judd Bagley has refused to answer questions about whether or not Deep Capture has a "conflict of interest" policy and if he approves of Patrick Byrne calling his critics, who happen to be Jewish like me and Gary Weiss, "gonifs."

Why is Judd Bagley so afraid to answer such questions about Patrick Byrne's activities at Deep Capture?

Apparently, Judd Bagley does not want to answer any questions because it is not in his interests or the interests of his real employers, Overstock.com and Patrick Byrne.

As I will describe below, Deep Capture LLC is a corporate public relations entity doing Overstock.com's bidding by attacking critics of the company.

The Society of Society of American Business Editors calls Deep Capture a "corporate public relations" entity

The Society of Society of American Business Editors and Writers denied Deep Capture membership to its organization because Patrick Byrne's activities as a self-proclaimed "journalist" and "those of DeepCapture seem closer to corporate public relations." See the email below posted by Byrne on Deep Capture's website (Click on image to enlarge):

Conclusion

As I described above, Overstock.com and Deep Capture LLC service each other hand-in-hand. Overstock.com and Patrick Byrne provides just about all of Deep Capture's funding. Steps were taken to conceal the true nature of the relationship between the two entities.
Statement of Auditing Standards No. 45 (SAS No. 45) cautions that:

...the auditor should be aware that the substance of a particular transaction could be significantly different from its form and that financial statements should recognize the substance of particular transactions rather than merely their legal form.

Therefore, KPMG should examine the substance of the relationship between Overstock.com and Deep Capture LLC and not be fooled by the smoke and mirrors used by Patrick Byrne to conceal his control over Deep Capture.

In addition, SFAS No. 57 cautions that:

Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. For example, an enterprise may receive services from a related party without charge and not record receipt of the services.

Even if Overstock.com does not directly compensate Deep Capture LLC to carry out its agenda, Deep Capture is providing services in the form of issuer retaliation against critics of the company and those services are considered "transactions between related parties" under accounting rules. Those services are funded by Overstock.com through commissions and by Patrick Byrne, simply by writing out a personal check.

Please note that this open letter has been sent to the Securities and Exchange Commission to assist it in its investigation of Overstock.com.

Respectfully,

Sam E. Antar

Other information:

January 25, 2010: Open Letter to KPMG: A Warning About Overstock.com, Your New Audit Client

Disclosure:

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 Overstock.com securities short or long. My research on Overstock.com and in particular its lying CEO Patrick Byrne is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I will probably end up joining corporate miscreants such as Patrick Byrne in hell. In any case, exposing corporate crooks is a lot of fun for a forcibly "retired" crook like me and analyzing Overstock.com's financial reporting is a forensic accountant's wet dream.

KPMG has sponsored at least two of my free speaking engagements to universities and colleges.

What is Mark Mitchell Hiding About Himself, Deep Capture, and Overstock.com?

Mark Mitchell, a washed up former journalist who is now a paid shill for Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne's private vendetta web site called "Deep Capture" is afraid to answer my questions.

For example, Tracy Coenen and I heard that Mark Mitchell was escorted from the building when he left his former employer, Columbia Journalism Review. According to Tracy Coenen’s blog:

This is also a good time to mention that the guy "from the Columbia Journalism Review" is apparently Mark Mitchell, Byrne's paid shill. According to a confidential source, Mitchell was escorted from CJR under mysterious circumstances.

Meanwhile, Patrick Byrne has taken steps to separate his Deep Capture smear web site from Overstock.com while admitting that he founded it. According to the Deep Capture web site:

Deep Capture is not part of Overstock….

However, the Deep Capture web site goes on to direct the reader to click on a link (http://www.overstock.com/?TID=deepcapture) to purchase merchandise at Overstock.com and 5% of the purchase goes to support Deep Capture.

According to Gary Weiss, Patrick Byrne has taken pains to cover up his ownership of Deep Capture. As of April 20, 2008, High Plains Investments LLC, owned by Patrick Byrne and a major shareholder of Overstock.com shares, was listed as the manager of Deep Capture LLC. By June 19, 2008, Judd Bagley, a former spokesperson for Overstock.com, and Evren Karpak, another former Overstock.com employee replaced High Plains Investments LLC as managers of Deep Capture LLC.

Judd Bagley is a nauseating cyber stalker who as an Overstock.com employee, originally set up an anonymous web site called antisocialmedia.net to stalk, intimidate, harass, smear, and blackmail critics of Patrick Byrne. In January 2007, New York Post reporter Roddy Boyd exposed Judd Bagley as the person behind the anonymous antisocialmedia.net web site. Bagley continues to run that web site and further stalk, intimidate, harass, smear, and blackmail critics of Patrick Byrne using anonymous aliases on internet message boards.

Evren Karpak is an internet message board troll hired by Patrick Byrne to work at Overstock.com after stalking, intimidating, harassing, smearing, and blackmailing Byrne's critics, like Bagley. Both Karpak and Bagley recently claim to have left Overstock.com and they are now paid shills for Patrick Byrne at Deep Capture with Mark Mitchell.

Originally, Mark Mitchell, like Judd Bagley, tried to hide his cyber stalking connection with Byrne. Gary Weiss caught Mark Mitchell pretexting (not disclosing his employment by Byrne) and lying about what Weiss said to him.

Mark Mitchell was heavily criticized for naivete and poor performance when he was a CJR editor, and violated journalism ethics by signing a letter from an anti-naked shorting organization while employed by CJR and researching an article on that subject. Mitchell has not denied that he is the "Mark Mitchell" listed as a signatory of that letter.

In a post on the Yahoo message board, I asked Mark Mitchell about him being escorted from the building. He emailed me the following:

From: Mark Mitchell [mailto:mitch0033@gmail.com]
Sent: Friday, July 25, 2008 4:58 PM
To: Sam E. Antar
Subject: Questions

Mr. Antar,

You asked me this question: "Have you ever been forcefully escorted out of any building as a result of your behavior?"

Would you care to explain how you came to ask this very specific question? Do you have information about any instance of my being subjected to force or violence? If so, what is the source of your information?

Mark Mitchell

This is obviously a sore subject for him. I responded:

From: Sam E. Antar
Sent: Friday, July 25, 2008 6:18 PM
To: Mark Mitchell
Subject: RE: Questions

To Mark Mitchell:

I'm asking the questions, not you.
Do you admit or deny it? Yes or no.

Sam E. Antar

Mark Mitchell's strange response asked me whether I have information about a mugging in which he was supposedly a victim.

Having not received any response from Mark Mitchell specifically denying that he had been escorted out of Columbia Journalism Review's office, I decided to ask him questions about Deep Capture and its relationship to Overstock.com and Patrick Byrne.

For example, Item 404, "Transactions with Related Persons, Promoters and Certain Control Persons" of Securities and Exchange Commission Regulation S-K requires disclosures of certain related party transactions and I was attempting to determine why Overstock.com has not made any disclosures relating to Deep Capture. In addition, I wanted Mark Mitchell's opinion about Judd Bagley's cyber stalking for Patrick Byrne and Overstock.com's continuing violations of SEC Regulation G. See my email below:

From: Sam E. Antar
Sent: Saturday, July 26, 2008 12:54 PM
To: mitch0033@gmail.com
Subject: Additional Questions

To Mark Mitchell:

Please answer each question separately and provide complete and unambiguous details:

• Who are the current and past owners of DeepCapture?
• Who are the current and past executives and managers of DeepCapture?
• Who are the current and past employees of DeepCapture?
• What is Overstock.com CEO Patrick Byrne's affiliation with DeepCapture?
• Does your employment for DeepCapture include posting messages on internet web sites such as Yahoo or InvestorVillage?
• What is DeepCapture's relationship with Overstock.com, High Plains Investments LLC, Haverford-Valley, L.C., and or any entity affiliated with Patrick Byrne?
• How much compensation is DeepCapture paying you?
• How is your compensation structured at DeepCapture?
• Have you ever received direct or indirect compensation from Patrick Byrne, Overstock.com, High Plains Investments LLC, Haverford-Valley, L.C., and or any entity affiliated with Patrick Byrne?
• Before your employment at DeepCapture did you ever receive any compensation or gifts from Patrick Byrne, Overstock.com, High Plains Investments LLC, Haverford-Valley, L.C., and or any entity affiliated with Patrick Byrne?
• Who hired you to work at DeepCapture?
• How often do you communicate with Overstock.com CEO Patrick Byrne?
• Please name each person who has a current or past role in setting editorial policy for DeepCapture?
• Who indemnifies you for the content of your stories on DeepCapture?
• Have you ever discussed the contents of any story published on DeepCapture with Patrick Byrne?
• Has Overstock.com CEO Patrick Byrne ever instructed you to write any story on DeepCapture?
• Have you ever posted messages on any internet chat sites, message boards, blogs, or other internet sites using an anonymous alias?
• If the answer to the above question is yes, please provide details of each and every posted message including the name of the web site?
• Please provide all aliases that you may have used on the internet?
• What is your opinion of your colleague Judd Bagley's spying on and stalking of critics?
• Do you believe that CEOs should obsess about their critics?
• Do you believe that CEOs should stalk, intimidate, harass, and/or smear their critics either directly or indirectly through proxies such as Judd Bagley?
• Do you consider yourself to be a proxy for Patrick Byrne's agendas?
• What is your opinion of Overstock.com's continued violations of Securities and Exchange Commission Regulation G?
• What is your opinion of Overstock.com's overstatements of EBITDA in violation of Securities and Exchange Commission Regulation G by improperly not reconciling EBITDA to net income and improperly removing stock-based compensation expenses from EBITDA?

Please note that any references to Patrick Byrne above is specifically intended to mean Patrick Byrne (CEO of Overstock.com) and any references to DeepCapture is intended to mean Deep Capture LLC and/or DeepCapture.com.

Regards,

Sam E. Antar

Mark Mitchell has not responded. What is he hiding?

To be continued....

Written by:

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Update (New Email from Mark Mitchell):

From: Mark Mitchell [mailto:mitch0033@gmail.com]
Sent: Monday, July 28, 2008 11:40 PM
To: Sam E. Antar
Subject: request correction

Dear Sam,

Your blog is false. You know very well that I was not "escorted" from the Columbia Journalism Review.

Please post a correction.

Thank you,

Mark Mitchell

My public response:

To Mark Mitchell:

I was simply reporting what I heard, unlike you who reports what he has not heard. I see no reason to change the specific item you are referring to.
Respectfully,

Sam E. Antar (White Collar Fraud Blog Reporter)

Note: Read Gary Weiss's latest blog post on Mark Mitchell.

Disclosure: Not long or short Overstock.com

Additional Information: For additional up to date coverage of Overstock.com, please read Tracy Coenen.