The Five Dumbest Things on Wall Street This Week

Barr's weekly take - a different view of the Langone objection to the NYSE and Archipelago merger; Canadian based Nortel buys US government technology integrator PEC Solutions; Deloitte & Touche's attempt to deny SEC allegations that it settled "without admitting or denying" gets an SEC smack; Kozlowski gets the label "Dennis the Menace" based on his decision to testify in his grand larceny and securities fraud case; Carl Ichan blunder at Blockbuster.

SEC Charges Deloitte & Touche for Adelphia Audit

The SEC's case against Deloitte & Touche has been settled, with a payment of $50 million dollars. Word to the wise for corporate insiders and auditors from Mark K. Schonfeld, Director of the SEC's Northeast Regional Office - "what is especially troubling here is that Deloitte recognized the risk of fraud posed by this client at the outset. When auditors turn a blind eye toward misconduct on a high-risk client and allow a fraud of this magnitude to go undetected, the consequences will be severe."

The Five Dumbest Things on Wall Street This Week

This week - Warren Buffet's poor returns; Coke's gallon pushing; the Martha Stewart-Sirius deal for an all woman's radio station; restated earnings at Doral - and the stock is down 70% this year; and Morgan Stanley cans a broker who asked a question during a Commerce Bancorp conference call - but it sounds like its all Philly politics, not commerce or conference calls.

Barr also gets this week's week's one liner "If you didn't know better, you'd swear the time was ripe for a Martha Stewart-brand portable satellite radio -- worn as an ankle bracelet. "

Reports: Langone, Others Seek to Buy NYSE

Reports: Langone, Others Seek to Buy NYSE: "A group of seat holders on the New York Stock Exchange, led by former NYSE director Kenneth Langone, are attempting to mount an effort to purchase the Big Board and override the exchange's announced merger with all-electronic marketplace Archipelago Holdings Inc., according to published reports Sunday"

This is going to get interesting. NYSE Insiders are saying that the Archipelago/NYSE merger presents a conflict of interest for Goldman Sachs, which is a 15% shareholder of Archipelago, and owns a number of seats on the Exchange. Plus Langone is one of the defendants in Spitzer's suit against Grasso regarding compesation, and has proven himself to be a fierce and feisty businessman and litigant.

NASDAQ to Acquire Instinet

Ah, there it is. Did anyone think the NASD was going to let the NYSE pick up a major competitor without a quick response?

Looks like we are back to two major exchanges again. POOF! Two giants of electronic trading are gone in an instant.

NASDAQ to Acquire Instinet

Dumb Like A Trader

Seems like only yesterday they were at each other's throats. An interesting overview of the history of relations between the NYSE and Archipelago.

The article contains what has to be the contender for the quote of the year - "Its nice to know in a changing world that people can still be bought." That comes from Thomas Caldwell who was party of Thain's study group. Interesting side note reading between the lines, the article says that Thain had the Archipelago deal in his "back pocket" months ago. While his friend Caldwell was buying up NYSE memberships.

Hmmm, seat prices have gone from a low of a million earlier this year to a high of 2.8 million on April 22.

All of this is from Forbes, and not verified, but just how many seats did Caldwell buy?

Just

Dumb Like A Trader - Forbes.com

NASD To Ban Sales Contests?

The NASD said on Thursday it is proposing to ban brokerages from conducting 'sales contests' that reward brokers for selling one particular security in preference to another.

The proposal would extend a prior ban on awards of non-cash prizes, such as concert tickets or stereo equipment, to encourage the sale of particular mutual funds, variable annuities and certain other securities.

Is anyone really doing this any more? Sure, for a period of time 15 years ago sales contests might have been a standard practice, but aren't the potential conflicts clear enough?

Oh wait, Reuters says that American Express is under investigation for sales contests to promote their proprietary "weaker performing" mutual funds. And Morgan Stanley ran sales contests with Britney Spears concert tickets as the top prize?

This rule change should sail through.

Thirty Months In Prison For Merrill's Former Head of Investment Banking

According to Forbes.com the former head of investment banking at Merrill Lynch who was convicted of taking part in Enron's bogus sale of power barges to the brokerage has been sentenced to two and a half years in prison, plus 6 months probation and a $840,000 fine.

So much for the courts going light on those involved in the corporate scandals.

Supreme Court Rejects Looser Standard for Stock Fraud Suits

In what can only be perceived as another victory for the defense of securities class action cases, the Supreme Court has ruled that plaintiffs must prove a clear connection between the alleged misrepresentations and the loss in stock value.

The Five Dumbest Things on Wall Street This Week

These may not be the dumbest things, but Colin Barr is doing this on a weekly basis. The stories are interesting though - Padding expense accounts by a union buster at Walmart?; Spitzer makes another blunder by saying AIG committed fraud, but he hasn't filed any charges, showing a severe lack of judgment and self restraint; Morgan Stanley, Purcell replacements; credit card fraud at GM; and Dollar Tree attempts to blame the lunar calendar for its poor sales. Alright, that last one isn't fair.

The Five Dumbest Things on Wall Street This Week

Some interesting choices, a warm and caring Hank Greenberg (from AIG) is viewed as a media/legal ploy, the "leadership void" at Morgan Stanley, Pfizer's promise to slash costs along with a new warning from the FDA regarding Celebrex, Spitzer's campaign uses AIG in advertising? and Fannie Mae accounting.

No Criminal Charges for AIG

In a statement made today, NY Attorney General Elliot Spitzer said that it was his believf that the AIG matter will be resolved as a civil matter. Commentators and investors are apparently taking this as confirmation that there will not be a criminal case against AIG or its officers.

Criminal charges could be the kiss of death for a corporation such as AIG.

The Five Dumbest Things on Wall Street This Week

Colin Barr of The Street.com has started a weekly review which is an interesting read and includes - the Morgan Stanley mess, Greenberg leaving AIG and the revelation that AIG will restate (losing 1.77 billion in the process), Qwest and MCI, the Miramax and Disney split, and the Cablevision/West Side/Jet Stadium bidding wars.

A Bloomberg fix? Say it ain't so.

Go Blue!

Just Another Billion-Dollar Lie

Matthew Goldstein at TheStreet.com is pounding AIG - or is he pounding the analysts?

According to Mr. Goldstein "most of the two dozen analysts who cover AIG had raised their earnings estimates, even after the public learned in mid-February that state and federal investigators were looking into allegations of accounting irregularities at the insurer. The analysts stood firm, even as AIG shares were plunging 24% to a little under $56 a share."