Litigation

Securities & Exchange Commission closes inquiry into Overstock.com

By Tracy Coenen

Overstock.com (NASDAQ:OSTK) announced today that the Salt Lake City office of the SEC notified them that it is not recommending any enforcement action against the company.

The following was reported:

“I know that the SEC has an obligation to look into allegations it receives about any company — even when those allegations are false,” said Patrick Byrne, Overstock.com’s chairman and chief executive officer. “I believe that this inquiry was initiated, and persisted, because of false allegations made by a cohesive group of short sellers and a few financial journalists who dutifully serve them. In this case, I believe these folks fomented the SEC investigation against Overstock.com then tried to claim that the existence of an SEC investigation was evidence of wrong doing. We knew that was false.”

I don’t know the SEC’s threshold for an enforcement action, and I don’t know exactly what they examined relative to Overstock’s financial reporting. I am quite sure that Byrne and company will portray that as though the company is completely exonerated.

Just as in the case of Usana Health Sciences (NASDAQ:USNA), that’s not exactly true. When the SEC decides to end an informal investigation or not take enforcement action, it doesn’t mean the company in question has done no wrong. It simply means the SEC isn’t pursuing the matter.

Is this a good development for Overstock? Sure. A company would rather NOT be under investigation. Does it mean the company’s troubles are over? Of course not. It is still a horribly run company that can’t turn a profit, and one which provides misleading and inaccurate financial disclosures to Wall Street. Eventually, something’s got to give.

Full post as published by The FRAUDfiles Blog on June 06, 2008 (boomark / email).