Online retailer Overstock.com’s regulatory troubles continue.
In September, the company disclosed that the SEC is again investigating its previously-announced restatements of financial statements in 2006 and 2008 and other accounting issues.
Now, CEO Byrne faces a difficult decision. As independent whistle-blower — and convicted white-collar criminal — Sam Antar explains:
When Overstock.com issues its next financial report (due in a few weeks), the company can either restate its affected prior financial reports to properly reflect income from underbilling its fulfillment partners as it was earned in those periods or the company can tough it out and wait for the SEC or Grant Thornton (new auditors) to force a restatement of its financial reports.
If Overstock.com restates its financial reports it will be the third time in three years that the company had to correct financial reports due to violations of GAAP: (1) inventory accounting error – Q1 2002 to Q3 2005, (2) customer refund and credit error – Q1 2003 to Q2 2008, and (3) underbilled income from fulfillment partners – Q1 2003 to Q2 2009. Patrick Byrne will have the unique distinction being the CEO of a company that restated financial reports from overlapping prior accounting periods three times: Q1 2003 to Q3 2005.
Overstock thinks it has been unfairly targeted. “All of the matters that are the subject of the subpoena have been thoroughly disclosed and we are disappointed, given the extensive public disclosures Overstock has previously made, that the SEC, given all of the challenges it faces, has apparently chosen to expend time and resources on another investigation of Overstock,” said Overstock.com Chairman and CEO Patrick Byrne in a September statement. “Rest assured, I will continue to speak out as I have on the shortcomings of our financial regulatory system.”
The company has been speaking out for years. Most prominently, Byrne and others at Overstock write for the site Deep Capture, which claims that “powerful actors have been able to influence or take control of not just the regulators, but also law enforcement, elected officials, national media, and the intellectual establishment.”
Some say that’s just a distraction. As investigative reporter Gary Weiss noted last week about the new SEC investigation:
As usual in such situations, Byrne has dispatched one of his underlings to stage a diversion, by posting an item in Byrne’s Deep Capture blog entitled “On Rolling Stone, Penson Financial, the Mafia, and Naked Short Selling.”
We won’t rehash the arguments here, but its clear that Overstock executives are displeased with financial regulation — especially when it’s going after them. No matter what the SEC says, Byrne and Overstock will probably disagree.