The pissing match between Overstock CEO Patrick Byrne and his former accounting firm continues.
Last week, in a very unusual move, Byrne announced that he had fired Grant Thornton because the firm had changed its mind about how Overstock should account for a $785,000 payment that boosted the company’s bottom line in Q1.
Then, in an even more unusual move, Grant Thornton said Byrne was lying. It also explained clearly, which Byrne hadn’t, that Overstock’s accounting treatment had improved the company’s bottom line in Q1 and that Grant Thornton believed this accounting was incorrect.
Grant Thornton Letter: “We disagree with the Company’s statement in
paragraph 7 ‘that upon further consultation and review within the
firm, Grant Thornton revised its earlier position’ regarding the
previously filed 2009 interim financial statements. This statement
is not accurate. The Company brought the overpayment to a
fulfillment partner to Grant Thornton’s attention in October. After
additional discussions with the Company, the predecessor auditor and
receipt of additional documentation from the Company we determined
that the Company’s position as to the accounting treatment for the
overpayment to a fulfillment partner was in error.”
This is a falsehood. On several occasions Grant Thornton discussed
with and provided guidance on the accounting for the $785,000
fulfillment partner overpayment during and prior to October…
It was only after we received the SEC’s November 3 letter, which
questioned our accounting treatment for the overpayment recovery and
asked whether we had consulted with our auditors’ national offices,
that Mr. Eldredge (as well as the managing partner of the Grant
Thornton Salt Lake office, Gordy Haycock) took the position we had
incorrectly accounted for the partner overpayment recovery. When we
pointed out that we had asked that their initial advice be confirmed
by national office, and had in fact received that confirmation,
Grant Thorton’s position became that the local engagement team’s
discussions with the regional and national offices had only been
“informal,” and that it had not been a “formal request” for national
review. To us, it appears that either the Grant Thornton local
office was overruled by its regional and national offices, or Grant
Thornton became concerned that the SEC would review its conclusions,
and only then did Grant Thornton decide to disavow its previous
So what happens now? Not much:
- We get more entertaining dispatches from Patrick Byrne.
- The SEC investigation into Overstock’s accounting shifts into an even higher gear.
- The company eventually restates its numbers and maybe pays a nominal fine.
- Overstock remains the most bizarre company in the industry.