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The Five Dumbest Things on Wall Street This Week

Cuckoo for co-co

1. Freston and Moonves Get Co-Opted

Viacom (VIAB) promoted two top executives to the posts of co-president and co-chief operating officer on Tuesday.

The appointments, says Viacom, are part of "the orderly transition to the next generation of senior management for Viacom."

There you have it, folks. Proof that Viacom's brain trust has collectively gone nuts.

See, there is no better way to create a disorderly transition than to tell two executives to share the job of co-chief-something-or-other. There's no better way to speed up an executive's departure than to go the co-route.

And though it's traditional for the co-whatevers to profess their abiding friendship and respect for each other on the way in -- as did Viacom's Tom Freston and Les Moonves on Tuesday -- these vows of collegiality on the way in serve only to heighten the snickering on the way out.

Yeah, remember back in the days when Time Warner (TWX) was known as AOL Time Warner? Co-chief operating officers Dick Parsons and Bob Pittman acted all friendly for the public after Parsons was designated the next chief executive and Pittman the next sole COO. Less than six months later, Pittman was out the door.

Pittman's departure recalled decade-old disharmony at Time Warner, back when it had been freshly assembled from Time Inc. and Warner Communications. First came co-chairmen and co-CEOs Steve Ross and Richard Munro, then co-CEOs Ross and Nick Nicholas, and then co-CEOs Steve Ross and Jerry Levin. The transitions, as we recall, weren't smooth and orderly.

Elsewhere, in April 1998, John Reed and Sandy Weill said they'd happily work as co-chairmen and co-CEOs of Citigroup (C).

"I'm used to sharing the power and responsibility," Weill said when the deal to create Citigroup was announced, according to CNNfn. "I have been married to my wife for 43 years," Weill said. "I'm used to being told what to do and we have managed to work that out over a long period of time."

A year and a half after Citigroup formed, Reed was out the door.

"A long period of time" means one thing at home and another thing at the office, evidently.

"Tom and Les have been good friends for years," Sumner Redstone assured Wall Street analysts on Tuesday.

Well, when things fall apart a year from now, at least they'll have those happy memories to look back on.

2. Say the Secret Word and You Win $2.7 Billion

Kudos to HealthSouth for spotlighting an important but too-often-overlooked ingredient of any successful accounting fraud: the code word.

Pixie Dust Bin
Toothless accounting

See, you can't have your employees going around saying, "The quarter just closed, but our results are coming up short. Let's make a few improper entries in our accounting system so we can fabricate a few hundred million in revenue, shall we?"

Saying all that takes too long. It wastes precious company time. Plus, it unneccesarily forces employees to confront what it is that they're doing: lying. Breaking the law. Unpleasant stuff like that.

So, when HealthSouth's board released on Tuesday its report on accounting fraud at the health care provider, we were happy to learn that employees had a variety of terms they used to describe the undocumented numbers that crept into financial statements each quarter. Those numbers miraculously added $2.7 billion to the company's pretax and pre-minority interest income over seven years.

"Pixie dust," some knowledgeable employees called the new entries. "Fairy dust," said others. "Gifts," too. Also "candy."

In the universe of accounting fraud code names, these are kind of cool, we think. Back at WorldCom (now MCI), they called the quarterly book-cooking the bland "Close the Gap." At the trial of former executives of cable operator Adelphia, onetime vice president of finance Jim Brown testified that he called his own manipulations "accounting magic."

Magic, pixie dust, fairy dust, whatever. It all proves that it's easier to believe in Tinker Belle than in what some companies will tell you.

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