The Five Dumbest Things on Wall Street This Week

5. Truckload of Stupidity

Toronto-based Biovail (BVF - Cramer's Take - Stockpickr) agreed to pay $138 million in cash to settle a class-action shareholder lawsuit alleging the pharmaceutical firm made a series of false and misleading statements in 2003 regarding the launch of Cardizem LA, a treatment for both hypertension and chronic angina.

The company admitted no wrongdoing, naturally, but agreed to cough up $138 million, or about one-third of its cash as of Sept. 30, in order to "eliminate the uncertainty and considerable expense associated with this matter and enable us to use, in much more productive ways, resources we otherwise would have devoted to this litigation," as Biovail Chief Executive Douglas Squires said in a statement.

Trouble is, Biovail has a history of finding unproductive things to do with its time and shareholders' money. This lawsuit is the latest in a string of dumb things done by the company.

In 2006, Biovail joined Overstock.com (OSTK - Cramer's Take - Stockpickr) in alleging that a group of short-sellers, sell-side analysts and journalists were conspiring to spread false and misleading information about the firms in an orchestrated effort to drag down the shares. Biovail's lawsuit specifically targeted former Banc of America Securities analyst David Maris for participating in the cabal. In September, Biovail dropped the lawsuit and paid BOA $2.1 billion to cover legal fees, according to The New York Post.

Back in 2003, the company infamously lowered earnings guidance, citing an accident involving a truckload of the antidepressant Wellbutrin XL. Not coincidentally, BoA's Maris was among those who claimed the company overstated the value of the cargo.

In November 2003, the SEC began investigating Biovail, in part because of the Wellburtrin controversy but also concerning accounting issues. The investigations by the Securities and Exchange Commission and Canadian regulators eventually focused on founder and former Chairman Eugene N. Melnyk, who retired last spring after being accused of breaking insider trading rules and failing to disclose Cayman Island-based trust accounts that at one point held nearly 20% of the company's shares, according to Bloomberg.

Given this track record of nonexcellence, perhaps Biovail's true strategy is to give its shareholders hypertension, and hope they'll drive up sales of Cardizem LA.

Dumb-O-Meter Score: 78. In the dumb-by-association department, Bivoail co-conspiracy theorists Overstock.com took a hit this week as well. Shares tumbled early in the week after CEO Patrick Byrne said the company's gross margins would be lower in the fourth quarter due to aggressive sales promotions and discounting. No word yet on how the short-selling cabal contributed to the gross margin hit.