Halloween’s just three weeks away (and I’m sure after four weeks of market mayhem, we can all use some sickly sweet treats). But just in case you forgot, Rite Aid (RAD) issued this press release on Wednesday to remind people that Halloween was a good time to cut loose:

“Since Halloween falls on a Friday, we are expecting customers will party this year,” said Steve Moss, Rite Aid seasonal category manager. With the financial stress of recent weeks, Moss said he believes many Americans will be dying to dress up, spend a night in someone else’s skin and have some fun.

By shear coincidence, that same day, Rite Aid put out its 10-Q, which had some truly scary stuff in it. One of the big problems is that the stock is trading below a buck — 53 cents this morning — which puts it in danger of being delisted and prompted a wide range of new warnings in the filing, including:

In addition, delisting of our common stock on the NYSE would constitute a “fundamental change” under the indenture governing our 8.5% convertible notes due 2016 (the “Convertible Notes”). If such a fundamental change occurs, holders of the Convertible Notes will be entitled to require us to repurchase their Convertible Notes, or any portion of the principal amount thereof at a price equal to 100% of the principal amount of the Convertible Notes to be repurchased, together with accrued interest…We can give no assurance that we would be able to obtain such financing, on favorable terms, or at all, or that we will be permitted to repurchase the Convertible Notes under our other debt instruments.

There were also new sharp warnings about the company’s highly leveraged position. While the company has been warning about this for awhile, the details that it provides in the filing are much more extensive, and, let’s call it what it is here: scary. We last footnoted Rite Aid at the start of the year, when Contributing Editor Wendy Fried noted the lack of toilet paper on store shelves in her Manhattan neighborhood.

Oh — and speaking of drug store chains, we couldn’t let pass yesterday’s announcement that the SEC had charged two former Duane Reade executives of fraud. Though I haven’t read the whole complaint, the press release outlines a series of fraudulent transactions designed to pump up revenues and earnings to meet Wall Street estimates and reduce expenses — classic tools in the fraud toolbox. DuaneReade was an early visitor to the site when we footnoted Cuti’s extreme compensation and unusually generous stock options.

People may disagree about whether a kiss is just a kiss or a sigh is just a sigh, but Footnoted readers know very well that words in SEC filings are never just words.

As Michelle highlighted in a post last week about Apple (AAPL) (and the comments that followed), alert investors can get ahead by paying attention to language in filings that differs from what’s been used in the past.

That’s why we found it startling to read the following passage in a 10-Q that Demandtec (DMAN) filed last Friday:

Many economists are now predicting that the United States economy, and possibly the global economy, may enter into a prolonged recession or depression as a result of the deterioration in the credit markets and related financial crisis, as well as a variety of other factors.

What’s different is that this is the first filing in the last several months to mention “the D word” as a possibility (as well as the first time Demandtec has used it).  What we see regularly are statements that use the word in a hypothetical context - never in a passage like this.

Wise minds out there differ on how bad things really are.  While this Bloomberg story noted that Goldman Sachs Group Inc. (GS) “said the U.S. economy will enter a recession ’significantly deeper’ than previously forecast”), this story from yesterday’s WSJ said that while “no doubt the parallels are stark and frightening…..the differences between now and then are even greater.”

It’s scary when we know we haven’t hit bottom, but we don’t know exactly where the bottom is. Maybe a couple more lyrics from Herman Hupfeld’s classic song will keep us grounded while we sort things out: ”The fundamental things apply, as time goes by.”

Image Source: The Claremont Colleges Libraries

On Monday, during the House Oversight Committee grilling of former Lehman Chairman and CEO Richard Fuld, Chairman Henry Waxman made note of Fuld’s impressive personal art collection. But it was the extensive collection owned by the company that popped up in this amended sales agreement filed in an 8K yesterday.

In the agreement between Barclays and Lehman from Sept. 22, Barclays was given the right to keep the art at Lehman’s headquarters at 745 Seventh Ave. in place for a year. During that time, Barclays will have the opportunity to purchase the art for the appraised value. If they don’t want it, it returns back to Lehman, where presumably it would be put up for auction as part of the bankruptcy.

In yesterday’s agreement, Bain Capital, which agreed to buy Neuberger Berman for $2.15 billion, got a similar deal: they get to keep the artwork located at 605 Third Ave. for a year (but not the art at 399 Park Ave.). In both agreements, what’s interesting (particularly to art aficionados) is that the collection can be broken up, so that both Barclays and Bain can pick and choose the pieces they want.

According to this Bloomberg story, the collection has over 3,500 pieces by a wide variety of well-known artists. The Neuberger Berman collection has another 900 pieces.

Image source: Tampa Museum of Art

Late Friday, the SEC announced that the short-sale ban that it had put in place on Sept. 19 would end at midnight tomorrow night. So imagine my surprise when I checked the list that came out last night to see that it continues to grow. As of last night, there were 981 companies on the short-sale ban, five more than on Friday. After a quick skim, I couldn’t tell which additional companies had made the cut (for some reason, the three exchanges don’t make it easy to figure that out), but it’s certainly interesting that even though the ban is less than 48-hours away from disappearing, companies are still asking to get on the list that when it launched, was “limited” to 799 companies.

Yesterday, at the Value Investing Congress, I had a chance to ask Pershing Square’s Bill Ackman what he thought about the ban during an hour-long press conference that he gave following his presentation (registration required) on Wachovia (WB) and, perhaps more importantly, what happens Thursday morning when those 981 companies return to the real world.

Ackman called the rule “one of the biggest blunders” by regulators and “one of the most damaging things done to capital markets. It’s done more to destroy investor confidence than anything else done by the Fed or the SEC. One of the reasons that I like investing in American companies is that I’m confident that the rule of law prevails. But here, you woke up one morning and short-selling was legal and then it was not. It was very arbitrary…It is exactly what the SEC is supposed to prevent.” He also criticized the fact that the list has continued to grow.

As for what’s likely to happen come Thursday when the ban ends, Ackman said he wasn’t sure. “I don’t know what the consequences are.”

During the press conference, Ackman also criticized the 13-F rule as “something set up in the 1970s as an experiment” adding that it was a way for “one collection of investors to get ideas from another collection of investors, which seems like you’re giving away intellectual property.”

Finally, while Ackman declined to give Chris Cox a grade for his handling of the crisis, mostly because he’s regulated by the SEC, Bloomberg has a very interesting story today about censorship of the Inspector General’s Report issued nearly two weeks ago on the failure of Bear Stearns.

Image Source: Daniel Barry/Bloomberg News

On Friday, Abraxis Bioscience (ABII) filed its proxy and one of the things that jumped out at me was the hefty increase in security expenses for Chairman and CEO Patrick Soon-Shiong: $1.06 million, compared with $727K last year.

What potential threats warranted the 45% increase? The proxy provides few details, other than this footnote: “For security-related reasons, we provide Dr. Soon-Shiong with the use of cars, security drivers, security systems for his residences, and personal and family security services.” The company also cites security — and management efficiency — as the reason that Dr. Soon-Shiong needed to use the company’s corporate jets for personal travel too. That expense increased even more dramatically to $205K from a measly $34K last year. We’re guessing that probably has more to do with the way the company calculates the expense since $34K seems unusually small.

I’ll be at the Value Investing Congress today and tomorrow, and hope to see some of you there.