Shares of Bidz.com (NASDAQ: BIDZ) are down around 4% today after the company announced fourth quarter results that can only be described as strange.

Where to begin? Sales for the fourth quarter of 2008 were $35.1 million, compared with $63.2 for the same quarter in 2007. That's a decline of about 44% but for the full-year, sales were up 10.8%. The real juice, though, was this little nugget buried at the very bottom of the earnings release under the auspicious headline "2008 Highlights and Accomplishments":

The Company was notified recently by the SEC of a formal investigation relating to certain aspects of its inventory accounting practices, as well as other matters. The Company intends to fully cooperate with the SEC regarding this matter. The Company remains confident its inventory accounting is correct and in full accordance with GAAP.

Just so you know: A formal investigation is a big deal.

After the bell, Beazer Homes (NYSE: BZH) announced it's now being formally investigated by the SEC. According to the company, the SEC is investigating whether any "person or entity related to Beazer Homes has violated federal securities laws." Interestingly, the company is already involved in several lawsuits due to its practices in the mortgage-origination business. In addition, the company fired its chief accounting officer last month because he tried to destroy company documents. Add all these factors up and it seems pretty fishy.

As you probably expected, Beazer's stock was hit in after-hours trading -- currently trading at $17.70 per share vs. opening at $19.65 Monday. Stocks always slide when the announcement of an investigation by the SEC hits the wires because investors become nervous about the company's management's integrity.

Although the very successful hedge fund Moore Capital is involved in the stock, I think investors would be wise to avoid this stock until the clouds clear. While many value investors make tremendous returns betting on stocks under investigation or very out of favor, I think that game is way too risky for most retail investors.

According to a study recently published in the Journal of Accounting Research, journalists are a lot better, or at least faster, at spotting signs of accounting fraud and corporate shenanigans than the SEC. Harvard Professor Gregory Miller measured the frequency of reporters beating the SEC to the punch in uncovering fraud and found that in roughly one-third of the 263 cases of accounting fraud confirmed by the SEC between 1987 and 2002, members of the press alleged wrongdoing before the SEC or the company announced any investigation.

The Columbia Journalism Review sums up the findings nicely: "And while beating the SEC to an investigation is like beating Porky the Pig in a bicycle race up the Alps, we concede it's not nothing."

I e-mailed Marketwatch columnist Herb Greenberg (Full disclosure: He's one of my heroes.) about the findings, because he was the only journalist to have proactively uncovered a case of accounting fraud before the SEC more than once; he's done that five times.

Given the relative speed with which journalists uncover fraud, I asked him whether the SEC could learn anything from the methods employed by journalist-gumshoes. Greenberg dismissed that idea saying that "There's a difference between reporting a story and formally investigating and finding legal fault .... No, nothing they can learn."

He added that that much-maligned band of investors known as short-sellers are often sources for investigative reporters, calling them the "first line of defense for investors because they're putting their own money on the line." But he said that really good information usually comes from "former employees, analysts, and mutual fund managers who have SOLD stocks for reasons other than valuation."

Dell, Inc.'s (NASDAQ:DELL) investigation by the SEC moved into formal status according to a statement by the company late yesterday. On Monday, when the company announced that it wouldn't file its second-quarter earnings reports to federal regulators on time, a spokesman for Dell told the Associated Press (AP) that the delay was unrelated to this widening probe by the SEC, but is that really true?

Chairman Michael Dell issued a statement Monday saying, "We are fully cooperating with the investigations and working to resolve any and all issues raised in connection with those investigations as quickly as possible, and we will take any appropriate remedial or corrective actions to address any problems." In a press release issued late yesterday, the company said, "Dell continues to cooperate with the SEC, and is committed to resolving all issues in connection with the investigation and regaining compliance with all SEC filing requirements as soon as possible."

With these statements, I find it hard to believe that the announcement of a formal investigation and the delay of second-quarter earnings reports are unrelated. The informal investigation of Dell's financial reporting started in August. The fact that the informal investigation moved to a formal one means someone likely is not cooperating and the SEC may issue subpoenas for documents, as well as other investigative techniques that are not used in an informal investigation.