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The 5 Dumbest Things on Wall Street This Week: June 28

5. Ebix Trix

If prayer is the last refuge of a scoundrel, then our good friends at Ebix (EBIX - Get Report) are nice enough to remind us what comes next to last.

Pledging a stock buyback, of course!

The insurance technology provider told the world of its plan to repurchase up to $100 million worth of its shares -- over the next two years -- last Friday. The proclamation came a day after the company's stock was cut in half on news that its sale to Goldman Sachs (GS) for $20 per share was cancelled as a result of a Securities and Exhange Commission investigation into "intentional misconduct" and allegations that the company engaged in accounting fraud.

"The Company believes that recent allegations published in the media and elsewhere are without merit, and that a share repurchase program represents an attractive use of its cash resources. The Board of Directors is confident that the Company is executing on an effective business strategy, which is generating both strong free cash flow and a robust contract pipeline," announced Ebix, adding that it will fund the repurchases through the $35.5 million in cash it has on hand as well as future cash flow from operations.

Really, guys? Your company is under attack for its accounting and that's your first response? Did you ever think that hiring a big-time, Big Four auditor might be a better use of your reserves at this critical juncture?

Not that we have anything against Cherry Bekaert, which has been signing off on all those acquisitions you've been doing at home -- and especially abroad -- since 2008. Nor do we have much to say about Cherry's predecessor, Habif, Arogeti & Wynne, which reviewed Ebix's books from 2004 to 2007 before quietly resigning.

The same neutral sentiment goes out to Habif precursor BDO LLP, which identified deficiencies in Ebix's internal controls to the SEC prior to its departure. Ebix hired BDO in 2004 to replace Big Four mainstay KPMG as a cost-cutting move.

Put it all together and it seems like Ebix could have saved itself a whole lot of trouble over the past decade had it simply stuck with KPMG as its auditor. Certainly it could have saved the money it is supposedly spending on its own stock. (Remember, just because a company announces a buyback program doesn't mean it is required to go through with it.)

Of course, KPMG did report "internal control matters" and "inadequate documentation for certain unusual transactions" before being shown the door. So maybe Ebix should consider giving one of the other Big Four members a shot at its books before going back to the well.

If one of the remaining three will take the job, that is.

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