This stock caught my eye because of Ian Hall's pick, on December 28 of last year for this stock to rise.  He was quite wrong, almost conspicuously so.  He managed to call a top, inadvertently, and I thought it would be fascinating to see how the stock could fall so hard after a pretty nice rise in 2009.

So there is this guy, his name is Barry Minkow and he is a convicted felon.  What did he go to jail for?  Stock fraud.  What does he do now?  He's a short seller and he runs the 'Fraud Institute' and apparently has ties to law firm of  Barrack, Rodos & Bacine.

This is a truly brilliant / evil example of how a short seller can manipulate the news cycle and make himself a nice chunk of change in the process.

This is a pretty good, balanced look at the issue by the Wall Street Journal.  http://online.wsj.com/article/BT-CO-20100114-709820.html?mod=WSJ_latestheadlines

His claim is that the company shouldn't be called a diet or meal-replacement company but a "multi-level marketing scheme that primarily markets a 'business opportunity.'"

So in essence because this company has found a novel way of selling its product (food that helps people lose weight) they are a 'pyramid scheme'.  I find this argument, from an outsider's point of view, to be extremely dubious.

Only because this is a fairly small-cap company which the financial press doesn't know about could he so easily perpetrate this fraud.

After the legal action, which had to be bankrolled by Brinkow himself, you've got crap like this on SeekingAlpha.  The author of this post is ... wait for it ... a friend of Minkow's and also a convicted felon.

http://stockwidget.seekingalpha.com/article/182435-an-open-letter-to-medifast-time-for-some-answers

"Disclosure: I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes, simply because I could. "

I thought this was a joke but alas, it is not.

I can't really speak to the quality of Medifast's products or its actual business.  I know they're making money, and yes, it may be due to a unique marketing proposition.  But if that marketing proposition is working, more power to them.  Obesity is as big of a problem in this country as stock fraud.