Updated from 8:32 a.m. EST
Ken and Steve Come Clean
Remember that grade school admonition, honesty is always the best policy?
A few high-profile CEOs appear to have forgotten that mantra this week or they simply believed that rule just didn't apply to them.
In both cases, each one looks stupid, or worse, just plain dishonest.
Bank of America
CEO Ken Lewis and
CEO Steve Jobs finally fessed up and revealed the obvious: They both need serious help.
Lewis told his employees last October that Bank of America "did not need and did not seek" the $25 billion it received in federal rescue funds. A bold statement at the time, Lewis was hailed along with
CEO Jamie Dimon as a savior of the banking business.
Lewis' boast that he could go it alone, however, was, in fact, a
. As reported in Thursday's
Wall Street Journal
, the knight in shining armor who singlehandedly rode in to save Merrill Lynch and Countrywide from certain disaster actually squealed for help a long time ago. The
said that Lewis has been talking with the Treasury Department since mid-December about additional bailout dollars to complete the Merrill deal. Bank of America shares fell almost 20% on Thursday's news to $8.50.
(On Friday, the government said it would invest an
and provide "protection against the possibility of unusually large losses" on an asset pool of about $118 billion of loans, securities and other assets.)
Jobs, on the other hand, requires medical, not governmental assistance. On Wednesday, the iconic Apple founder finally admitted in a letter to his employees that his "health-related issues are more complex than I originally thought" and would be stepping aside until June to recover. Chief Operating Officer Tim Cook will be responsible for Apple's day-to-day operations while he is away.
Jobs had pancreatic cancer in 2004, and last year he appeared gaunt in public appearances, leading to speculation about his wellness. In an effort to finally answer questions about his health, Jobs announced last week that a "hormone imbalance" had led to his dramatic weight loss, not the return of cancer. Apple shares shot up 4% on the news, despite a slew of doctors being openly skeptical of Jobs diagnosis.
Now, just days later, he says he'll step aside. Apple stock fell 5% on Jobs' disclosure.
Jobs' sickness, like Bank of America's balance sheet, prove once again that fibbers always get found out.
Dumb-o-meter score: 95 -- Trust your eyes, not CEOs.
Mrs. Madoff's Money
Forget Bernie. Ruth Madoff is the real financial magician in the family.
A judge allowed disgraced financier Bernard Madoff to remain free on bail Monday, rejecting a move by prosecutors to jail him for mailing more than $1 million in jewelry to family and friends last month. Madoff and his wife Ruth, who was not named in the criminal case, have been holed up in Madoff's Manhattan penthouse since he admitted in December to orchestrating a multibillion dollar Ponzi scheme. An appellate judge on Wednesday reaffirmed the decision to keep Madoff free on bail.
Prosecutors said the gifts were grounds to have his bail revoked because the remnants of Madoff's assets will have to be returned to defrauded investors. Madoff's lawyer Ira Sorkin argued that Madoff's wife sent the expensive jewelry before a court order barred her from doing so.
In his decision, Judge Ronald Ellis dismissed the notion of Madoff being a flight risk and said "the government fails to provide sufficient evidence that any potential future dissemination of Madoff's assets would rise to the level of an economic harm."
We here at The Five Dumbest Lab traffic in stupidity on a daily basis, so we were well prepared for such a ridiculous result. After the
failed to catch Madoff in the first place, even after being warned on numerous occasions, we could only expect similar screw-ups from a fellow branch of government.
Even so, as we dissected the judge's ruling, we kept wondering how Ruth Madoff made enough money to purchase millions of dollars' worth of diamond jewelry, let alone mail them out as holiday gifts. Same goes for the multimillion dollar homes in Montauk and Palm Beach she posted as collateral to keep her beloved Bernie out on bail.
Certainly she did not make all that dough through the sale of her cookbook, now ranked 180,195 on
According to Judge Ellis, "Mrs. Madoff voluntarily agreed to a freeze on her assets, including her jewelry."
We object to that language, your honor. Those assets are not hers.
The money to buy them came from Bernie's investors. And it should go back to them as soon as possible.
Dumb-o-meter score: 90 -- We want the truth, Ruth.
Lennar Gets Messy
execs once spent their time building big houses. Now, they sling mud at a guy who did time in the
Lennar announced Wednesday that it is taking legal action against Barry Minkow, a California pastor who served time in prison for stock fraud, for publicly accusing the homebuilder of treating their joint ventures like Ponzi schemes. Minkow's allegations helped send Lennar shares down as much as 28% last Friday.
Lennar issued a press release saying it has named Minkow and his company, Fraud Discovery Institute, as defendants in a pre-existing lawsuit against real estate developer Nicolas Marsch III. Lennar alleges Marsch engaged in libel, extortion and various criminal acts against the company during a deal involving a pair of properties in Southern California.
The addendum to that suit alleges Minkow has been operating as an agent for Marsch in connection with the ongoing lawsuit, taking payments of between $50,000 and $100,000 for his services.
"Marsch and Minkow launched a widespread public attack on Lennar over the Internet and in the media by making multiple false, malicious and defamatory statements," according to the complaint.
Lennar was also sure to remind readers about Minkow's criminal past in its statement, referring to him as "an ex-felon who was convicted of white-collar fraud." In 1987, Minkow's carpet-cleaning company, ZZZZ Best, was revealed as a scam, costing investors an estimated $100 million. He was convicted of fraud and sentenced to 25 years in prison, but served only seven.
Lennar shares dropped 8% on Wednesday's announcement of legal retaliation, three times more than the overall market.
So what did Lennar get from slinging mud back at Minkow?
Poorer shareholders and a place on our
Dumb-o-meter score: 75 -- Sticks and stones will build houses, but name-hurling will only sink your stock price.
Citi's Not-So-Sad Goodbye
Even in his farewell letter Bob Rubin could not adequately explain what he did at
to deserve all those millions.
Rubin officially departed Citigroup last Friday, announcing his decision in a letter to CEO Vikram Pandit. Rubin, who's last official title was "senior counselor," had come under fire over the past two months for his role in encouraging the New York bank's devastating foray into subprime debt. The bank's problems forced it to accept a $45 billion government bailout and sell a majority stake in its valuable Smith Barney brokerage unit to
for $2.7 billion in much-needed cash.
Rubin joined Citi in 1999 after serving as Treasury Secretary under President Clinton. He will remain a director until Citi's annual meeting in April. In the bank's statement, Rubin said that he intended to "deepen his involvement in outside activities and organizations to which he has been strongly committed."
In his "Dear Vikram" letter, Rubin repeatedly tried to explain his "roles" at the company since his hiring a decade ago, a period in which the company's stock plummeted from $36 a share to its present level below $5.
Rubin said his advisory role allowed him "to act as a sounding board" for senior management responsible for making major acquisitions and important hires. Meanwhile, his "other role" was to work with clients and other Citi relationships.
That secondary role, says Rubin, "gave me a keen appreciation of the important place Citi has in the global financial system and global economy."
So let's get this straight: Citigroup paid Rubin upward of $100 million over the last decade, not to do anything, but to
listen and appreciate
like a college freshman auditing a music class.
Now that's good work if you can get it. Even if you don't know what to call it.
Dumb-o-meter score: 85 -- Rubin's next act should be disappearing.
Return of the Asinine Accountants
Eight years of audits down the drain!
Price Waterhouse told the new board at troubled Indian outsourcer
Wednesday to disregard eight years of its audit reports. The accounting giant says its opinions in relation to Satyam's financial statements should "no longer be relied upon" in the wake of revelations that the company's chairman falsely inflated profits.
Ramalinga Raju stepped down from Satyam -- now referred to as "India's Enron" -- last week after disclosing that he had been cooking the books at the country's fourth-largest software services company. Raju said in a statement that about $1 billion, or 94% of the cash on the company's books, was fictitious.
Thanks for looking out for us, guys. Your warning is ever so helpful now that Satyam's New York-listed American depositary receipts are trading around 90 cents a share, down more than 90% since Raju's shocking confession last week. If only you spotted that billion dollars a little earlier -- or even looked for it in the first place -- maybe investors could have avoided this disaster.
Holders of Satyam's U.S.-listed shares have already filed at least twoclass-action suits against Satyam, which counts among its clients American A-listers like
. And Satyam said Wednesday night it had appointed
to assist the company in restating its accounts.
Meanwhile, Price Waterhouse is blaming the fiasco on Satyam's management for giving it "inaccurate and unreliable" information, proving once again it is better at passing the buck than accounting for it.
Dumb-o-meter score: 95 -- Even we can't account for such stupidity.
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.