Mumbai's Madoff (or Bombay's Bernie)
has a friend in Mumbai.
, the founder and chairman of Indian outsourcing firm
Satyam Computer Services
, stepped down Wednesday after disclosing that he had been falsely inflating profits for years at India'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.
Raju's shocking disclosure sent Satyam's Bombay-listed shares, Indian equity markets and the Indian rupee tumbling, with Bombay's benchmark index falling 7.3%. Satyam's New York-listed American depositary receipts plunged more than 90% from $9.35 a share to less than 90 cents.
"What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years," said Raju. "I am now prepared to subject myself to the laws of the land and face consequences thereof."
Ain't that always the case with these massive frauds? They start out as tiny accounting irregularities or profit shortfalls, yet somehow snowball into major-league financial catastrophes. And it's always right under the nose of a lazy or clueless auditor or regulator. In the case of
, Arthur Anderson was asleep at the switch. For Madoff, it was the
. In the Satyam scandal, PriceWaterhouseCoopers is now figuring out how it signed off on cooked books.
Furthermore, it's always the guy you least expect behind the really big scams, like Bernie Madoff, the former
chairman running a $50 billion Ponzi scheme. In the Raju case, it was one of the founding fathers of Indian IT and a two-time winner of the E&Y Entrepreneur of the Year award.
Not unlike Madoff's ability to draw in high-profile clients, Satyam had its own A-listers who trusted what the company had to offer, including
"It was like riding a tiger, not knowing how to get off without being eaten," wrote Raju in his confession.
Come to think of it, Raju, being eaten alive might be your just desserts.
Dumb-o-meter score: 95 -- Don't boo-hoo for Raju. Lock him up with Bernie.
Madoff's Family Jewels
Bernie Madoff successfully concealed billions of dollars of other people's money, but he failed to hide the family jewels.
A government prosecutor on Monday requested that
be jailed pending trial, after the alleged Ponzi schemer violated an agreement with the court by mailing watches, jewelry and cufflinks worth more than $1 million to relatives and friends.
Assistant U.S. Attorney Marc Litt told U.S. Magistrate Judge Ronald Ellis at a bail hearing that Madoff, now under "pent"-house arrest in his Manhattan apartment, obstructed justice by attempting to liquidate assets needed by defrauded investors.
"In the face of a direct and clear order of a court, he violated the order," said Litt, referring to Madoff's pledge that he would not disturb his assets. The 70-year-old Madoff, was arrested in December on securities fraud charges, alleging he duped investors out of as much as $50 billion.
Madoff's lawyer, Ira Sorkin, however, dismissed the prosecutor's protest, maintaining that his client's mailings "happened innocently," adding that some of the items belonged to Madoff's wife Ruth. Sorkin also said the Madoffs even sought the return of items they sent out on Dec. 24 after the couple learned it was verboten to mail anything out.
Come on counselor, even the clods at the SEC aren't dumb enough to fall for those lame excuses. Nobody "innocently" mails out a million dollars in jewelry, especially someone under criminal investigation for a massive fraud.
Yo, Bern, here's a thought: Instead of mailing the booty to your pals, how about arranging to meet all your duped investors at a pawn shop to redeem the gems? It won't make up for the billions you lost, but at least you'd finally be thinking of the folks who deserve whatever bucks you have left.
Dumb-o-meter score: 90 -- End this farce and put Bernie behind bars already.
Google's Ill-Fitting Suit
Is the supermodel a
or not? The legal world and
investors are dying to know.
cover girl Liskula Cohen sought
a court order
earlier this week to force Google to reveal the identity of an anonymous blogger who bashed her online.
In a filing in State Supreme Court in Manhattan, Cohen said that comments posted on Google-owned Blogger.com referring to her as a "skank" and "old hag" were defamatory, malicious and untrue.
"I would have to say the first-place award for "Skankiest in NYC" would have to go to Liskula Gentile Cohen," wrote "Anonymous" in one posting. After a few more not-so-nice offerings, the blogger postulated that, "Desperation seeps from her soul, if she even has one."
Cohen's lawyer, Steven Wagner, said the model is "very upset" about the online slam, adding that the laws protecting freedom of speech do not give people the right to "defame others on the Internet or on blogs" while hiding behind a screen name.
OK Steve, if that's what you believe, then we will not conceal ourselves behind a cyber-veil when we say that you and your client are acting like complete publicity-mongering morons.
You've gotten Cohen back into the spotlight for 15 more minutes, now it's time to turn it off. Our legal system is already overburdened enough without having to deal with a slew of cases involving supermodels with hurt feelings.
Google has smartly declined to comment about Cohen's complaint. Maybe the other side will do us a favor and stop talking, too.
Dumb-o-meter score: 85 -- The fate of the Republic depends on anonymous bloggers. Not supermodels with lawyers.
BofA's Broker Stampede
Bank of America
better start wrangling that "Thundering Herd" of brokers he just bought before they stampede right out the door.
The head of
brokerage operations, Bob McCann, announced his plans to leave the securities firm Monday, an announcement that came just days after the completion of the company's acquisition by BofA.
McCann, a 26-year veteran of the firm who is said to be popular among Merrill's 17,000 brokers, had led the wealth-management division at Merrill, but saw his responsibilities narrowed in a new lineup set by BofA in October.
On Tuesday, Bank of America named Dan Sontag, a 30-year Merrill veteran who previously served as head of wealth management for the Americas, to fill McCann's vacated spot.
While BofA moved quickly to replace an important stone in what Lewis calls the "crown jewel" of his banking empire, it was not before Wall Street began loudly questioning if the emperor had a firm grasp over his subjects.
"In our view, Merrill's brokerage unit was likely the main attraction for Bank of America in completing the acquisition, and if brokerage attrition picks up, the acquisition becomes less valuable," wrote Stuart Plesser, a banking analyst with
Standard & Poor's
Plesser is not alone in fearing a clash of cultures between BofA's buttoned-down bankers and Merrill's hard-charging brokers. Analysts across Wall Street are wondering how long Merrill's rainmakers will stick around while their new bosses in Charlotte cut costs.
Lewis recommended to BofA's board on Tuesday the elimination of bonuses for top executives after shares fell 66% in 2008. We don't want to be in the path of a raging herd of Merrill brokers if Lewis tries to clip their commissions, as well.
Dumb-o-meter score: 75 -- Saddle up Ken! Or kiss your crown jewel goodbye.
Quest's Bad Tests
short for "questionable"?
Quest Diagnostics acknowledged it provided potentially inaccurate results over the last two years to thousands of people who had their vitamin D levels tested,
The New York Times
reported Thursday. The nation's largest medical laboratory admitted that it has been sending letters to doctors since last October listing the patients who might have received erroneous test results and is offering free retests.
A Quest spokesman says that problems in a few laboratories led to the questionable results on some tests performed in 2007 and 2008. The errors potentially could have led a number of patients to forgo vitamin D supplements that they may have needed.
Vitamin D is an essential nutrient needed for healthy bones. Human beings produce Vitamin D when they are exposed to sunlight, and it's also found in foods like eggs, fortified milk and salmon. Vitamin D testing has grown in recent years as studies suggested that inadequate levels may boost the risk of heart attacks, bone weakness and cancer.
Quest's test inaccuracies were first disclosed by the Dark Report, a newsletter for pathologists and lab technicians. Robert Michel, editor of the Dark Report, said it was the largest recall of test results he has heard since he started in the field in 1991.
"It's an extraordinary event when a fully accredited and licensed laboratory produces such a large number of inaccurate results, and it seems not to have recognized the problem for 18 months," Michel told
. "That's a long time to miss something this big."
We here at the Five Dumbest Research Lab aren't scientists, but checking a patient's blood for Vitamin D doesn't seem all that difficult a task.
Here's a test for the brass at Quest Diagnostics: Can you say 'boneheads?'
Dumb-o-meter score: 75 -- Quest flunked this test. Miserably.
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.