Nautilus CFO Isn't All He Claims in SEC Filings

When Bowflex maker Direct Focus jumped to the New York Stock Exchange Tuesday from Nasdaq, it also changed its name to the Nautilus Group (NLS - commentary - Cramer's Take).

Could it be that Nautilus, whose business model has long made it the focus of short-sellers, is trying to give itself a new image? Perhaps, but beyond the image it's the same company with the same issues and the same management.

Speaking of which: Here's something the exchange and investors, lured by the new image, might want to know: CFO Rod Rice isn't quite what he holds himself out to be in SEC filings.

According to the April 26 proxy statement of the Vancouver, Wash.-based company, Rice is a certified public accountant who received his B.S. in business administration from Portland State University, with a major in accounting and economics.

Well, not quite.

Rice received his CPA license on June 19, 1995, from the state of Washington, but he let that license lapse a year later. Rice didn't show up as being currently licensed anywhere else in the U.S.

Without a license, according to the Washington State Board of Accountancy, he can't call himself a CPA. (The "Prohibited Practices" section of the "Rules/Policies" section of the accountancy board's Web site states, "No person may hold himself or herself out to the public or assume or use the designation 'certified public accountant' or 'CPA' or any other title, designation, words, letters, abbreviation, sign, card, or device tending to indicate that the person is a certified public accountant or CPA unless the person holds a license.")

This is of particular interest to Washington because not only is Nautilus based in Washington, but Rice once held a license there. An accountancy board spokeswoman says Rice "does not have practice privileges in the state of Washington. He is not licensed nor certified in the state of Washington." (Can't very well call yourself a certified public accountant if you're not certified!) The spokeswoman says that means he can't so much as refer to himself a CPA -- even in Nautilus literature and SEC filings. Doing so, the board says, makes the person "guilty of a crime" and subject to a fine of as much as $10,000 and/or six months in the clinker.

That's not all: Rice, 38, claims in the most recent proxy statement that he majored in accounting and economics. That may be what he claims, but according to Portland State University, Rice's graduation records show that he majored only in accounting and never even applied to include any other major on his records.

Not that any of this should be surprising. Rice has been subtly trying to make his background look better than it really was for some time. At the time Nautilus went public in 1999, Rice's bio in SEC filings referred to him as having been a senior assistant accountant in the audit department at Deloitte & Touche. That was then changed in April 2000 to merely say that he had been an "auditor" at Deloitte. (Nicer ring to it, don't you think?)

Neither Rice nor the company's spokeswoman returned calls Friday from my colleague Mark Martinez, who left a detailed message about the issues we were raising.

However, today the company replaced its old "Direct Focus" Web site with a "Nautilus" Web site. Among the changes were ones to Rice's bio. On the old Web site, his bio said he was "an accountant" with Deloitte & Touche, that he majored in accounting and economics and that he is a certified public accountant.

In the new bio there's no mention that he majored in economics; instead, it says economics was his minor. Also, it no longer refers to him as currently holding a CPA; it says, instead, that he "worked as a certified public accountant" at Deloitte & Touche.

Trouble is that he left Deloitte in January 1994, and didn't get his CPA license until June 1995. (During his employment at Deloitte he worked in the Portland, Ore., office; the Oregon Board of Accountancy says it has no record of Rice as ever having been licensed as a CPA in Oregon.) As for that minor in economics: Portland State has no formal record of that being his minor.

And this note: A year ago April, Nautilus, concerned about the growing short position in its stock, issued an amendment to its proxy encouraging its investors to do what it takes to get possession of shares that have been lent to short-sellers. Such action can create a short squeeze, an event whereby short-sellers must rapidly purchase shares, causing the shares to rapidly rise. That's what happened with Nautilus, whose stock price since then has more than doubled. But then again, so has the short interest!

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Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback and invites you to send any to Herb Greenberg. Greenberg also writes a monthly column for Fortune. Click here to be notified immediately by email whenever Herb Greenberg posts to RealMoney.

Brian Harris and Mark Martinez assisted with the reporting of this column.