Tag: Sam Antar

Accounting News Roundup: Treasurer Is Not a Disclosure-Worthy Position at Overstock.com; SEC Investigating Repurchase Accounting; Deloitte Considers Camping at World Financial Center | 03.30.10

• Another Key Departure at Overstock.com: It Went Unreported, Too [White Collar Fraud]
Criminal-turned-forensic sleuth Sam Antar is reporting on his blog that SEC problem child Overstock.com had another key employee depart the company but this time, the Company failed to report it publicly. Gary Weiss was tipped off about the departure of Richard Paongo, the former Treasurer at OSTK, in an anonymous post that was confirmed on Mr Paongo’s LinkedIn profile.

It appears that Mr Paongo’s departure occurred around the same time as ex-CFO David Chidester’s which was reported to the SEC.


Sam notes the requirements of an 8-K disclosure:

If the registrant’s principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or any person performing similar functions, or any named executive officer, retires, resigns or is terminated from that position, or if a director retires, resigns, is removed, or refuses to stand for re-election (except in circumstances described in paragraph (a) of this Item 5.02), disclose the fact that the event has occurred and the date of the event.

So maybe OSTK figured that Paongo’s was worth sharing with investors? Sam says, “Apparently, it’s Overstock.com’s position that none of the above applies to Rich Paongo. However, Paongo’s departure from Overstock.con [sic or maybe not?] can be viewed as a material event requiring disclosure amid an expanding SEC investigation and given Paongo’s role at the company.”

Whether or not Paongo’s departure qualifies as a disclosable event might be arguable but the timing of his departure is certainly noted. In semi-related news, Overstock still has a couple of days before the 10-K extension runs out, so we’re likely to hear more out of SLC.

• S.E.C. Looks at Wall St. Accounting [NYT]
With Repo 105 on everyone’s brain, the SEC figured it should snoop around and see who else is using the repurchase agreements. Bank of America and JP Morgan have already admitted that they use repurchase agreements but Mary Schapiro remains coy about what companies are getting the crook-eye.

• Deloitte eyes sticking with World Financial Center [Crain’s New York]
Deloitte is in the market for about 600,000 square feet to house some its New York employees and one possibility is that the firm will set up camp at World Financial Center where it is currently the largest tenant. The firm is also reportedly considering 825 Eighth Ave.

Crain’s reports that Casa de Salzberg was looking for 1 million square feet last year, considering possible locales at 11 Times Square and 277 Park Ave. Deloitte insists that it was never looking for 1 million square feet and will be perfectly happy to cram the employees from the current two non-WFC locations into one place.

Quote of the Day: Sam Antar Is Ready to Rumble | 03.26.10

I challenge John Thomas Financial CEO Thomas Belesis to a match on the Jerry Springer show. To even the odds, he can bring Overstock.com CEO Patrick Byrne. Two crooks versus a convicted felon born in Brooklyn. They can bring actor turned stock pumper Shia LaBeouf for added muscle, too.

~ Sam Antar, reacting to Thomas Belesis calling him an idiot after Antar suggested that Shia might be able to shed some light on the goings-on at John Thomas Financial involving InterOil. And if you forgot, Sam and Patrick have a bit of a history.

Sam Antar Is Still Waiting for an Apology from Patrick Byrne and By the Way, Has Never Engaged in Naked Short Selling

Sam Antar knows an accidental criminal hero when he sees one: his cousin Eddie Antar was hailed as a champion of cheaply-priced consumer electronics in the Crazy Eddie days, though the poor saps in New York didn’t realize he could price his goods so cheaply because he was stiffing the government on sales and payroll taxes. Patrick Byrne and Overstock.com are pushing to corner the accidental criminal hero market by denouncing the evils of naked short sellers (bad bad bad), of which they seem to be convinced Sam is one.

While we’re on the topic of OSTK’s campaign to end evil naked short sales, I hereby volunteer to help Overstock edit their naked short selling page, by the way, as it’s not only a dry read but a tad poorly-written. Just sayin. Helpful girl that I am, it’s the least I can do.


Anyway, Sam’s still waiting for his apology from Patrick Byrne but in the meantime, would like him to take back those mean things he said about Sam naked shorting them to death. In an email to the SEC, Byrne himself and Overstock.com audit committee member Joseph Tabacco this weekend, Sam sets the record straight:

First off, I have never been involved any illegal naked short selling.

Second, how can Overstock.com label me as an “anti-Overstock.com blogger” when:

I correctly reported in my blog that Overstock.com used an improper EBITDA from Q2 2007 to Q2 2008 in violation of SEC Regulation G to materially inflate its financial performance, in light of its later amended disclosures.

I correctly reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement.

Third, please note Utah Attorney General Mark Shurtleff received $5,000 in cash from Overstock.com a few days prior to writing his defamatory letter about me. Both Chief Deputy Attorney General Kirk Torgensen and Deputy Attorney General Richard Hamp acknowledged that Shurtleff’s claims about me were false in various tape recorded conversations cited in my blog.

Sam goes on to explain that he’s actually doing Overstock a favor by uncovering fraud that its own audit committee has seemed to, um, overlook. You know, so they can set themselves right with the SEC and skip the restatement next year, filing all those extensions can get pricey and time-consuming you know.

See, Patrick, why so hostile? We’re all just trying to help!

Three Ways That Patrick Byrne Can Apologize to Sam Antar

As you’re probably aware (if not, check the links below), it hasn’t been the friendliest of exchanges between criminal CFO/forensic accounting sleuth Sam Antar and Overstock.com CEO Patrick Byrne. Sam being Sam, he recently reached out to Patrick Byrne to see if he would be interested in a mea culpa:

From: Sam E. Antar
Sent: Monday, March 08, 2010 11:02 PM
To: Patrick M. Byrne
Subject: Overstock.com Restatement
Importance: High

Hi Patrick:

Will you finally admit that I was correct when I reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement?

You owe me a public apology.

Regards,

Sam


Our understanding is that Pat hasn’t responded to Sam’s request for an apology yet (we’re hopeful!) so Team GC thought we’d offer some suggestions to Dr Byrne should he decide to take the high road and apologize to Sam. Having been in this situation more than once myself, I can honestly say sometimes you’ve just got to suck it up, buy some flowers, and admit that you’re an ass but totally repentant.

Overstock.com gift cards – Nothing says I’m sorry like free stuff that the aggrieved party can pick themselves. Bonus, the overhead on Byrne’s own inventory must be low. You know, because it’s his, not because there is any monkey business going down on OSTK’s financials.

An SEC Gift Shop Goodie Basket – I busted Sam in an SEC baseball hat at Stanford last week so wouldn’t it be cute if Byrne got him a whole basket full of fun regulatory shwag? Awww, what a precious moment it would be watching Sam pull out DoJ beer cozies and a color-changing SIGTARP coffee mug. Who doesn’t love tchotchkes? PB can’t go wrong! I’d even throw in a pair of NY Fed Pistol Team patches for that added touch of flair.

Cupcakes – Come on, no one can resist cupcakes, not even Sam E. Antar’s hardened criminal ass. You know, might as well send some to the GCHQ while he’s at it, we’ve been putting up with this Overstock shit for months too. Hopefully even Patrick Byrne knows when it comes to cupcakes, it’s best to invest in high quality, over-priced boutique cupcakes. Even my cheap ass knows that.

Earlier:
Winners and Losers in the Overstock Restatement
Even Earlier:
Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?

Sam Antar at Stanford: Jr. Deputy Accountant Gets a Live Dose of the Criminal Mind

Last week, I took the day off from work and headed down the 101 to sit in on former Crazy Eddie CFO and self-proclaimed criminal Sam E. Antar speaking to Stanford MBA students on, what else, fraud and the criminal mind. Sam is a friend of both JDA and Going Concern and it was excellent to see him recount the Crazy Eddie story to an auditorium of future MBAs.

Ironically, he showed up wearing an SEC baseball cap, which is akin to JDA owning a Federal Reserve hoodie (I do) and didn’t waste a second getting to the point of his visit.

“I’m gonna be the guy that fucks you guys up,” he told the room before beginning the presentation, “I’m a racist and a scum bag but I hate everyone equally.”


I could literally see the audience squirm in response. I already knew Sam was a tad offensive and was counting on getting an extra dose of it; there was no squirming in the media corner.

“Political correctness helps the criminal, not you,” he explained, “It limits your behavior, not the criminal’s.”

Right.

Sam went into auditor standards like the fraud triangle though insisted there is no such thing as rationalization. “Criminals know right from wrong. We don’t plan on failure.”

We even got to see a vintage Crazy Eddie ad spot as Sam’s presentation was spliced with images from the 2006 Court TV episode of Masterminds detailing the Crazy Eddie fraud. That’s for the sections that Sam doesn’t tell you; the details are plentiful in his spiel though don’t let that catch you off guard, he insists he is still just as dangerous as he was before he was caught.

You can get the Crazy Eddie backstory from Sam’s Web site (if you aren’t fortunate enough to be able to play hooky and see him spook Stanford MBA students in person) here, here, and here. If you get the chance, I highly recommend checking him out live (leave your valuables in the car).

And then there’s the video of Sam and Eddie meeting up decades after their fraud was discovered — and Sam gave up his family (and, consequently, himself) — that I recommend you not miss.

So long as there are unqualified auditors being piled into audits they aren’t trained to perform, there will be guys like Sam E. Antar figuring out a way to distract, deter, and delude them, no matter what it takes. For Crazy Eddie, it didn’t take much. What’s to say things have changed?

Sam Antar Photograph by Buck Ennis for Crain’s New York Business and Investment News.

Bad News: Forensic Accountants Are Crooks Too

Allegedly of course! Despite our best wishes for a forensic accountants to be fraud-busting crusaders that pursue truth, justice and all that crap, this corner of the profession is not immune from shiesty characters.

Lewis Freeman, “Miami’s go-to forensic accountant”, has been charged with embezzling $2.6 million from his clients. The Miami Herald is reporting that Lew has pleaded not guilty but is planning to change his plea to guilty “within a few weeks” while his attorneys try to negotiate a lighter sentence. The Herald also reports that two other employees of his firm, including the CFO, will be charged as co-conspirators in the case.


When you think about it, this really exposes Freeman as not being a very smart guy, just smarter than the people he was ripping off. As criminal mastermind Sam Antar told us in an email, “Lewis Freeman may have been considered ‘Miami’s go-to forensic accountant’ but he was not a very bright guy. He simply took old money from his client’s trust accounts and replenished it with new money. As a forensic accountant, he should have known that ultimately such Ponzi schemes end up collapsing over time.”

Despite this, Freeman was able to carry on the scheme for approximately a decade, swindling up to 250 victims.

Wondering what this latest development meant in terms of fraud involving forensic accountants, Sam told us, “Forensic accountants turned white collar criminals present a real challenge for law enforcement, since they (excluding Lewis Freeman) are far more sophisticated in their knowledge of anti-fraud measures and are more innovative in exploiting weaknesses in internal controls than the common white collar criminal.”

And don’t worry, they’re out there, “Freeman is probably not the only forensic accountant turned Ponzi schemer out there. The smarter and more sophisticated one’s have not been caught yet,” Sam said. Got it. Suspect everyone.

We first mentioned Lewis Freeman last fall when his firm was under investigation by the FBI and that his firm briefly served as the Chief Restructuring Officer for the Palm Beach Funds that were part of the Tom Petters orgy of fraud.

The bright side is we can’t foresee any scenario where the image of accountants gets worse.

Miami’s ‘go-to’ forensic accountant pleads not guilty to fraud [Miami Herald]

(UPDATE) Fooling Auditors Is So Easy, a Caveman Could Do It

Thumbnail image for sachdeva_sue.jpgIn the spirit of O.J. Simpson, Tracy Coenen explains today, that if Sue Sachdeva stole $31 million and spent most of it on some high-end threads and then sold the crap she didn’t want, it would’ve been a snap.
We’re not talking Enron type stuff here, just making off with cash:

All it takes are three steps to make this fraud nearly undetectable in a company in which the other members of the executive team aren’t paying attention. (And don’t worry, dear readers, that I may be giving away any secrets to committing fraud and covering it up. Any serious fraudster already knows these three things.)
1. Keep the fraud off the balance sheet.
2. Keep all transactions below the scope of testing by the auditors.
3. Don’t commit fraud during the last month of the fiscal year and the first month of the following fiscal year.
Can it really be this simple?


Here’s the quick and dirty:
Point 1 – Tracy notes that 80% of audit procedures focus on the balance sheet so if Suze was slamming all the bogus transactions amongst 4 or 5 income statement expense lines, no one would get wise to it.
Point 2 – If she did it, Suze probably knew what GT’s scope was (it’s supposed to be super-secret). She could plan the amount of her transactions to fall under this scope every time.
Point 3 – Auditors probably spent most of their time looking at bank statements for the last month of the fiscal year and the first month of the subsequent fiscal year. The rest of them don’t get much attention.
So there you have it. Throw in the incestuous management team, auditors that may be trying to get on each other and you’ve got a slam dunk.
UPDATE 7:38 pm: We got to wondering if Tracy’s statement “Any serious fraudster already knows these three things” were true, so we asked one. Crazy Eddie CFO, Sam Antar indulged us:

[Tracy] is correct. The fraudster always has the initiative because they are judgment oriented in their approach to crime, while auditors are process oriented in their approach to audits. In other words, fraudsters know how to think out of the box to solve problems and achieve their goals, while auditors rely too much on process and procedure to accomplish their missions. In the criminal’s world, judgment is more powerful than process.

We’ll leave it there (that’s right CNN).
Koss Corp.: Commit the fraud and cover it up [Fraud Files Blog]

Sam Antar Wants You to Think Like a Crook

Sam Antar.jpgIn early December, the JDA gave us a little taste of how the mind of a crook works when she interviewed Sam Antar, the former CFO of Crazy Eddie’s.
We caught up with Sam again recently and in case you had decided that he had redeemed himself by speaking to universities, government agencies, and businesses telling those people how to detect fraud, Sam would take issue with that.
“I’m the same crook that I was when I was the CFO of Crazy Eddie’s. I haven’t changed. I got caught,” Sam told us. Sam doesn’t believe in redemption but he will tell you that he’s reformed, “A criminal is like an addict. You’re either in recovery or you’re not.”
In addition to his feelings on his past criminal behavior, Sam has strong opinions about the audit profession and how the current accounting curriculum does not adequately prepare young auditors for the masterminds they’re up against. “To catch a criminal, you’ve got to think like a criminal.”


Sam would never suggest that you all take a turn at white collar crime in order to become better auditors. That would disappoint your parents.
So what are his ideas? Here’s a few things to get you started:
• Sam believes that the current curriculum should be expanded to include criminology, criminal psychology, forensic accounting, and courses that focus on internal controls.
• With this expanded curriculum, an advanced degree program should be implemented for those students that wish to become CPAs.
• In addition, Sam believes that the CPA exam should be expanded to include a section dedicated to fraud.
We did some looking around and found that two schools: Carlow University in Pittsburgh and Franklin University in Columbus, OH both offer undergraduate degrees in Forensic Accounting and that two more: St. Thomas University in Florida and University of Charleston in South Carolina offer graduate degrees.
As long as white collar fraud remains front page news, there will be people asking “where were the auditors?” Right or wrong, that is the reality of the situation. You can fight it tooth and nail but ultimately the market will demand more forensic audits for high risk clients. Even if the odds of you finding a single fraudulent transaction in your entire career is nil, shouldn’t you be prepared for that chance?
Sam thinks so. And he convinced (or maybe just conned?) us. You still got it, Sam.
Photo by Buck Ennis for Crain’s New York and Investment News.

Because There is No Shortage of Criminals

fraud.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
Over the weekend, I had the pleasure of speaking with Sam Antar of White Collar Fraud. I won’t give him too many props (lest he think his wily criminal charms got to me) but our conversation was both relevant and disconcerting.
In case you aren’t acquainted with Sam, he’s the ex Crazy Eddie CFO who ripped them off and now does speaking tours talking about, well, crime. But there’s a lot more than that at work here, that’s just his schtick.


So what did I learn?
I believe my editor thinks I’m a doom and gloomer so here’s some good news: besides suggesting we start training more qualified forensic auditors fresh out of school, Sam insists there is a chance for real financial reform.
Do you take your reform advice from an ex-criminal? I remind you here that a tax cheat is in charge of the IRS, do with that information what you will.
Anyway, the point here is that financial statements lack integrity. Without integrity, investors are groping in the dark and criminals are able to execute their schemes. Foreign investors are scrambling to leave US capital markets, could that be because our statements are – generally speaking – unreliable?
So. Sam’s 3 step plan to restoring sanity to financial statements. Take it for what it is.
1. Redefine audit committees as truly independent. No member of the audit committee should derive a salary or other compensation from stock options or stock holdings. Period.
2. Committee members should be qualified. CPAs and securities lawyers are qualified to sit on an audit committee, not marketing managers and other “average” sections of the corporate population.
3. Forensic accounting should be standard curriculum in university accounting programs. Don’t eliminate 404(b), if a corporation can’t afford the audits required to be a public company, then don’t become one.
We’ll have to agree to disagree on that final point, I don’t think tedious audits are the solution. However, perhaps if we had more qualified auditors out in the trenches, I might be inclined to be slightly less skeptical about the effectiveness of more softcore audits.
Stay tuned as we’ll be picking Sam’s brain again soon.
GC Posts Referencing Sam Antar:
Grant Thornton: Patrick Byrne’s Pants Are on Fire
Obvious Sign of Fraud: You’re Having Sex with the Client