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Sam Antar “It takes one to know one” and He Knows Patrick Byrne
By Stacie Clifford Kitts, CPA
I’ve watched with interest the online clash between CEO Patrick M. Byrne of Overstock.com and a handful of bloggers and journalists. The basic issue appears to be a consensus, among this group that Mr. Byrne is (allegedly) a crook [and maybe a little unstable] who is also (allegedly) cooking the books of the company he is charged with running.
Sam Antar who has the best bio snippet I have read to date….
I am a convicted felon, former CPA, and former CFO of Crazy Eddie. There is a saying, “It takes one to know one.” I teach law enforcement, professionals, and students about white collar crime and how to catch corporate miscreants….
In my blog, I expose white collar crooks just for the fun of it…
….really really R-E-A-L-L-Y dislikes Mr. Byrne. Based on Mr. Antar’s “it takes one to know one” philosophy, Sam insists that he knows Patrick pretty well.
Mr. Antar has made this determination based on his analysis of the publically available financial information of Ovestock.com. You can read Mr. Antar’s many comments about Mr. Byrne at his acclaimed blog White Collar Fraud.
Mr. Antar’s rehash of his part in the Crazy Edie fraud scandal at his website http://www.whitecollarfraud.com is also a good read. There is no doubt that this recount should be mandatory reading for all new staff accountants.
As for my take….
I’ve always believed based on my experiences working in both public accounting and industry, that the financial statement audit process [limited to large publically traded companies]was for the most part a silly practice that boiled down to ongoing compromises made by auditors to sustain the fine line walked to keep clients. Although the audit practice has tightened up -some – over the years i.e. the PCAOB, I think we are still looking at an overriding drive for accounting firm profit over good sense.
Evidence you ask.
In my opinion, the fact that Overstock.com was able to find an audit firm amidst all the (alleged) controversy is evidence enough. It’s too bad that the audit firm’s work papers aren’t public information, because I would looove to get my hands on the Client Acceptance Form that KPMG put together to prove their acceptance of this client. If only to see how they have addressed these allegations. [I hope they have really good practice insurance.]
Anyway…What’s a Client Acceptance Form you ask?
A Client Acceptance Form is a checklist that an auditor uses to decide whether they should accept a company as a client. This document incorporates questions about whether the firm believes that they have the proper knowledge, training, and staff to handle the engagement. However, it also wants to know things about the target client too. For instance, there are questions about the integrity of the company’s management, the chances that there is fraud in the financial statements, and questions regarding whether there is evidence that management may be motivated to commit fraud.
There appears to be plenty of evidence that the management integrity of Overstock.com is at least in question [if of course you believe the many journalists and bloggers who have commented on Overstock’s current woes]. This alone should have precluded an audit firm from accepting the engagement (in my opinion). Obviously, this acceptance is profit motivated, but KPMG – people – come on -what – are – you – thinking.
If you would like to read, more about the controversy check out this recent post by Sam
Post Script: I saw fraud unfold up close and in person at a public company I worked for in the 90’s. I was not part of the fraud scandal. However, watching what happened after it was discovered makes for an interesting story. Stay tuned for more on that truly fascinating tale.
A Small Town and A Diabolical Marketing Strategy that Sucked Me in.
By Stacie Clifford Kitts, CPA
This was exactly what I was observing when I saw the sign that sucked me in. We were driving slowly, very slowly as the speed limit was reduced to 35 mph through this particular town. And as I admired the homey almost soothing atmosphere, I spotted a sign in a cafe window framed in delicate lace curtains.
HOMEMADE DEEP DISH PIE $4.99
“Oh honey,” I said as I turned toward my husband clapping my hands and bouncing slightly in my seat. “Wouldn’t it be fun to stop in for some homemade pie? Can we?”
“Of course,” he said and he immediate pulled over to search for a parking spot.
And you know what?
I wasn’t disappointed by the looks of the café at all. Nope – the decor was exactly how I had pictured it would be. The occasional black and white photos of days long past were hung over aging flowered wallpaper. There was a lunch counter with red stools along the back wall and wooden tables with miss-matched chairs filling the space between. Each table had a small vase holding a single daisy. It really had the perfect small town feel.
And even though I couldn’t see into the kitchen, I knew who was back there. Yes of course – who else could it be but a sweet elderly grandmother lovingly baking her famous pie, her grey hair pulled tightly back in a bun, her flour smudged apron covering her 1950’s style dress. Sigh – I couldn’t wait for my small town – homemade – deep dish – pie experience.
We headed toward the back and sat at the lunch counter where we found the menu tucked between the condiments. I quickly buried my nose among the greasy pages and tried to decide what type of pie sounded good, cherry, apple, peach, strawberry. I didn’t notice the waitress until she asked, “What can I get you?”
“I think I will have a piece of cherry….,” I began as I glanced up into the face of a young woman who had several facial piercings and hair colored a very unnatural shade of red.” …Pie,” I finished.
Okay, so fine, the waitress didn’t really fit my small town fantasy. But that didn’t mean that my homemade pie wasn’t at that very moment being placed on some dainty flowered china by the grandmother in the kitchen. Right – the sign said HOMEMADE DEEP DISH PIE you know- I mean – there were lace curtains tied back with bows for heaven’s sake.
But when a young man in a dirty apron place in front of me a small white bowl with a spoon protruding from the side, I tried to explain. “No I ordered the homemade – deep – dish – pie.”
“Ya, cherry, this is it.” He said as he moved away. And as I stared into the bowl unable to move, all I could think was, where’s the pie lovingly made by the little grandmother in the kitchen?
And as my husband began to giggle, I realized the horrible truth. I had just paid $4.99 for a bowl of -of – canned pie filling?
That’s right – my homemade deep dish pie was a bowl full of canned cherry pie filling – I was completely mortified.
But not the hubby. He wasn’t mortified at all. In fact, he thought it was funny. Worse, he actually thought it was brilliant.
“Brilliant? Brilliant?” I stammered once I could speak. “What do you mean? I will never come back here again, this is terrible. It’s a bowl of pie filling for crying out loud.”
“What difference does it make?” He asked. “The locals know not to order the ‘homemade’ pie. Think about all the people who blow through here on their way to some place else. Heck most people wouldn’t even slow down if they didn’t have too. The sign in the window got us to come in and buy something. They’re not worried about repeat business from the tourists. When you think about it, it’s a brilliant marketing strategy. After tax, they probably made like a 400% profit off that bowl of pie filling. Why spend the money on actual pie?”
Why spend the money? Why? I was so disappointed that I wasn’t going to get my homemade deep-dish pie.
But even though disillusioned, I had to admit, it was true. If not for the sign, we would never have stopped. I glanced around the room wondering how many people had been lured in by the promise of pie only to be disappointed. And then it occurred to me, how many patrons might actually be locals slyly watching from the corner of their eye – a sad and slightly twisted form of local entertainment. Who knows, maybe a few. I mean come on, a bowl of pie filling has to piss off a least a few tourists.
But even so, I have no doubt that tucked away in some little back office is our grandma and her old accountant complete with a hand cranked adding machine bending steadily over a desk feverishly scribbling the results of some brilliant yet simple tax strategy which allows these diabolical townsfolk a way to keep all those profits from their homemade deep dish pie.
Stacie's Tax Stuff 