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TheStreet Open House

Ex-Crazy Eddie CFO Joins Einhorn in Slamming Green Mountain

Stocks in this article: GMCR

BOSTON ( TheStreet) -- Is Green Mountain Coffee Roasters (GMCR) cooking the books?

Many think so, especially after reading the recently released 110-page thesis from hedge fund manager David Einhorn. In the piece (titled "GAAP-uccino"), Einhorn lays out an elaborate analysis highlighting the company's expiring K-Cup patents in 2012, alleged accounting irregularities and a lack of transparency from management. Since the release of the report Monday, the stock has plummeted 25%. (Still, the stock has more than doubled this year.)

One person who isn't surprised by the news is Sam E. Antar, a convicted felon and former CFO of Crazy Eddie, the electronics chain that went belly up in the 1980s. Antar helped mastermind an A-level fraud that eventually cost investors hundreds of millions of dollars. To atone for his sins, Antar now spends his time teaching others about accounting shenanigans, helping to identify and catch the crooks.

Green Mountain's accounting practices aren't making the company friends on Wall Street.

Antar became interested in Green Mountain after a blogger asked him a question about the company in 2010. Once he started looking at the books, it was obvious there were problems, he says. "All I can tell you is that Green Mountain is clearly violating SEC Disclosure Laws and GAAP rules," Antar said in a phone interview.

Kathleen Shaffer, Green Mountain's investor-relations coordinator, was unavailable to comment on claims made by Einhorn and Antar when contacted by TheStreet. Sandy Yusen, director of public relations, is out of the office until Oct. 25.

Antar has been blogging about what he says are accounting irregularities at Green Mountain since late 2010. While much of Einhorn's analysis is focused on the fundamental flaws with Green Mountain's business, Antar is reviewing only accounting.

What's Green Mountain doing that looks so fishy? According to Antar:

1. On Sept. 20, 2010, the company was notified of a Securities and Exchange Commission inquiry and request for voluntary information concerning "revenue recognition practices and the company's relationship with one of its fulfillment vendors." The next day, Michelle Stacy, the head of the Keurig unit, exercised 5,000 options and immediately sold her shares at $37 per share.

A day after the information for the SEC inquiry was released to the public (Sept. 28) via an 8-K, Green Mountain's stock dropped to $31.06. Antar finds it "hard to believe that Stacy did not know anything about the SEC inquiry and that her sale of stock was not a mere coincidence." There's a class-action lawsuit against Green Mountain, alleging Stacy and other insiders engaged in illegal insider trading.

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