Five Dumbest Things on Wall Street: May 23

This story contains a correction.

1. Biovail of Ignorance

Last Friday, Canadian biotech Biovail (BVF Quote - Cramer on BVF - Stock Picks) settled criminal allegations. Again.

This time the charges stemmed from the Department of Justice and were related to the way Biovail handled the release of its heart drug Cardizem LA. The company said that a segment of its pharmaceutical business known as Biovail Pharmaceuticals is pleading guilty to offering doctors money to put patients on Cardizem. In addition to this admission of wrongdoing, Biovail is kindly offering the government $24.6 million to settle the matter.

The misdeeds stem from antics by former CEO Eugene Menlyk, under whom Biovail gave a long-acting version of Cardizem, along with $1,000, to doctors for use in trials of the drug. The Wall Street Journal and Barron's reported instances of this misdeed in 2003. In a 2006 lawsuit, Menlyk cried foul, claiming the stories were unfounded, planted in the media by short-sellers.

Now Menlyk's righteous indignation has come back to haunt him. Documents in another suit launched against Biovail by a Canadian union pension fund have revealed that Biovail senior manager Rolf Reininghaus hesitated to disclose the Cardizem program because investors would surmise that Biovail was "bribing physicians." He added that the tactic "is close to the line" but said it's also important that Biovail stock go up. Biovail settled that lawsuit in December for $138 million.

Since then, the Securities and Exchange Commission has filed complaints against Melnyk and other Biovail alums, and Menlyk also remains on the radar of federal prosecutors.

In a press release, current Biovail CEO Bill Wells expressed relief, saying he is "pleased to resolve another legacy action. The agreement with the DOJ represents the fourth such action to be resolved in the past six months." He added that "the [settlement] agreement eliminates the significant exposure to the Corporation related to this matter and should immediately reduce our ongoing legal expenses."

Only after years of dealing with a history of bribery and cover-ups can a guilty plea to federal charges start to look like a positive result.

Dumb-o-meter score: 65. If Biovail hadn't settled the bribery suit, "the company was at risk of being excluded from doing business with any health program sponsored by the U.S. federal government. These programs represent a material proportion of Biovail's business," it said.

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