Skip to main content

Posts

Overstock.com Hatchet Man Judd Bagley's Downward Spiral: Junkie, Confessed Criminal, Admitted Adulterer

As a criminal myself, in my many years managing the Crazy Eddie fraud, I learned to be careful about employing people with mental problems or substance abuse issues. Byrne himself, of course, was completely unhinged, with his paranoid rants and sometimes anti-Semitic and misogynist comments, making him a laughingstock. In January 2013, Byrne was arrested for having a handgun concealed in his luggage as he tried to board a commercial flight at Salt Lake City airport, and he told police he sleeps with a gun. He hired paid goons like Bagley (currently employed as the Director of Communications at Overstock.com) to stalk his real and imagined adversaries and to write lengthy conspiracy theories on the Internet.

In the years that I’ve written extensively about Overstock.com (NASDAQ: OSTK), I have always been amazed about its bizarre CEO Patrick Byrne and the gang of misfits he has surrounded himself with. By far, the worst was a real loser named Judd Bagley. He dredged up that character f…
Recent posts

Nu Skin Inventory Red Flags Remain Even After $50 Million Impairment Charge

On July 22, 2014, I warned investors that Utah-based multi-level marketing company Nu Skin Enterprises' (NYSE: NUS) surging inventory levels might lead it "to recognize a material impairment charge against inventory in a future period." On August 4, 2014, in a follow-up blog post co-authored with Zac Prensky, we warned investors about a massive inventory pile up in Mainland China. On August 6, 2014, Nu Skin reported its second quarter 2014 financial results and recorded "a $50 million write-down of Mainland China inventory." However, even after the $50 million inventory impairment charge, the pile of remaining unimpaired inventory is equal to enough merchandise to fulfill 335 days of sales versus only 146 days of sales in the comparable second quarter of the previous year. Therefore, there is a high risk that Nu Skin may have to reduce gross margins to clear out excessive inventories and there remains a high risk that it may have to report another material inv…

Why Nu Skin Must Come Clean on Troubling Inventory Red Flags

Co-authored by Sam E. Antar and Zachary Prensky

This coming Wednesday morning, Utah based multi-level marketing company Nu Skin Enterprises (NYSE: NUS) is scheduled to report its second quarter earnings. In its Q1 2014 10-Q report issued in May, major questions were left unanswered as inventories ballooned to $410 million. This pile of inventory is equal to enough merchandise to fulfill 346 days of sales – compared to only 149 days of sales in the comparable first quarter of the previous fiscal year. It's an increase of 132% over the prior year – an enormous red flag that shareholders would have expected management to explain in significant detail.

Rising inventory levels don't square with management's explanation

In its Q1 2014 10-Q report (page 17), Nu Skin claimed that, "we built a large amount of inventory during the first quarter for planned product launches in 2014...." However, Nu Skin’s excuse does not square with its own reported numbers. In reality, the …

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…

Overstock.com CEO Patrick Byrne Spying on People--Again

Fresh off the heels of a California Judge imposing a $6.8 million judgment against Overstock.com (NASDAQ: OSTK) for false advertising and unlawful business practices, the company is in trouble again. This time a class action complaint alleges that employees of the company cold called the cell phone numbers of prospective customers seeking to sell them insurance, secretly recorded those conversations without their permission, and deceitfully obtained "highly personal and private information." [Download Complaint]

According to the complaint:

Plaintiff alleges that Defendant [Overstock.com] continues to violate Penal Code § 632.7 by impermissibly recording its telephone conversations with California residents while said residents are on cellular telephones.
The complaint further alleges that:

9. On or about March 12, 2014, Plaintiff received a telephonic communication from Defendant on Plaintiff’s cellular telephone. During the conversation, Defendant attempted to solicit Plain…