The Five Dumbest Things on Wall Street This Week

4. Surgical Strikes Back

Thank goodness that brokerage firms have expressed a desire for analysts to engage in critical, independent research on publicly traded companies.

If only those publicly traded companies shared the same desire.

We call your attention to United Surgical Partners International (USPI), the owner-operator of surgical facilities.

As reported by Herb Greenberg on our RealMoney.com Columnist Conversation, USPI made it perfectly clear on a Wednesday conference call how it deals with people who are skeptical about the company's business prospects: It cuts them off.

It all happened when short-seller Marc Cohodes, a shareholder in TheStreet.com Inc. (TSCM), publisher of this Web site and others, was granted an opportunity to ask a question on the call. Here's how it went, according to the Research Lab's unofficial transcript of the call (which, sports fans, differs slightly from Greenberg's unofficial transcript):

Operator: Our next question comes from the line of Marc Cohodes from Rocker Partners. Please go ahead.

Marc Cohodes: Hello. Thanks for taking my call. I'm sort of new to this -- new to this story. And it seems like there's an awful lot of moving parts in a very regulated business. And given your leverage and all these issues that are out there, if you have facilities that are well-run and doing well, why do you need to keep levering up to grow? Why are you so actively engaged in this rollup strategy if everything's well? That's question one. Question two, why would you want to be part of a drill where doctors have business arrangements with some of these facilities? That always leads to problems. Why, why would you engage in behavior like that? Those are my first two questions.

USPI CEO Donald Steen: It sounds more like a speech.

We gave the information on our positive cash flow from operations. And we are generating and will generate enough cash flow from operations to fund our operations, our routine capital expenditures, our construction projects that are under way, and our future de novo startup facilities.

Cohodes: Well, that's not true --

Steen: [unintelligible]

Cohodes: -- You still need to raise money. You sold stock and you're leveraged in doing this. The cash you're generating just covers your, your maintenance of these things. I mean, if I had a business that was allegedly growing as fast as yours, why keep buying, especially out-of-control areas like Spain?

Steen: Operator, could you cut that call off. I mean, he won't let me answer the question. So we can take the next question, please.

So there you have it. Did Cohodes make a speech? Maybe, but so have bullish analysts countless times on conference calls, without company executives commenting on the obvious. Was Cohodes trying to cover too many points in too short a time? Yes, but bulls are guilty of that, too. Was he jarringly confrontational? Yes, but balance that against all the analysts you've heard who are embarrassingly obsequious.

Sooner or later, companies will have to acknowledge that they have critics. Now might be a good time.

5. Harvey Har Har

Speaking of open debate, how about that Harvey Pitt and William Webster?

Our favorite part of this unfolding story is how one of the things the Pitt-led Securities and Exchange Commission is devoted to is disclosure. As in Regulation FD, for fair disclosure. As in a boatload of new rules, proposed this Wednesday, to improve companies' financial disclosures as mandated by the Sarbanes-Oxley Act.

So what does Pitt fail to do, evidently? Disclose a wee problem that Webster, the anointed head of a new accounting oversight board, had when he was overseeing a single company's accounting.

If a hero ain't nothing but a sandwich, disclosure ain't nothing but a Demi Moore movie.

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