Dubai's Dubious Bet
The good folks at Dubai World are desperately seeking an oasis in the Las Vegas desert. Sadly, all they have stumbled upon is a
Dubai World, a developer, is suing MGM Mirage because it's worried about the viability of the CityCenter complex, an $8.6 billion joint project between the two companies.
In a lawsuit filed Monday in Delaware Chancery Court, Dubai World subsidiary Infinity World claims that MGM Mirage's statements about its financial condition put the project at risk. Infinity World is asking the court to award it unspecified damages and relieve it of its obligations under the venture.
Specifically, Dubai World's general counsel, George Dalton, cited concerns about a statement in MGM Mirage's annual report, warning it could default on its loans for CityCenter, widely touted by MGM Mirage as the most expensive private commercial development in U.S. history. The bill for this behemoth could push MGM Mirage, which lost $855 million last year, to seek bankruptcy court protection.
Dalton's concerns over MGM's survival are certainly not unfounded. The casino company, currently buckling under the weight of $13.5 billion in debt and a severe downturn in gaming revenue, won a waiver from the terms of some of its debt last week, giving it until May 15 to get its financial house in order.
On Monday, Fitch Ratings downgraded MGM Mirage's Issuer Default Rating to the lowest possible junk rating. Shares of the company's stock have plummeted 95% over the past year to less than $3.
While spats between companies are fairly common, this brawl has the makings of two dimwits throwing punches in the air; hence, its inclusion into our Dumbest tally. Maybe they've both spent too much time in the desert because they aren't making any sense.
Just last week, MGM CEO Jim Murren told investors that the relationship between the two companies was "outstanding" when it obviously had imploded. Meanwhile, Dubai World's point man Dalton told reporters that, despite slamming its partner with a very public lawsuit, the company still wants to work with MGM and had "no choice" but to take legal action.
It just goes to show you, even in Las Vegas the house does not always win. Especially when it's divided among idiots.
Dumb-o-meter score: 95 -- Dubai World and MGM in Las Vegas? Truly a losing pair
Lehman Brothers couldn't sell itself to save itself. Hopefully, it can do better with 1,630 green duffle bags, 353 compact golf umbrellas, 682 white Lehman coffee mugs and 24 screw-pull wine openers inscribed "LB."
Lehman Brothers Holdings, now operating in liquidation mode, negotiated the return of thousands of Lehman-logoed corporate gifts last week that were wrongly transferred to
through the sale of the bankrupt securities firm's brokerage unit. The so-called "trinkets," currently stored in closets and warehouses across the country, will be returned to Lehman and sold to pay creditors, according to a court filing late last week.
"The debtors and Barclays wish to resolve any dispute concerning ownership of the gift merchandise," according to the filing in U.S. Bankruptcy Court in Manhattan. A final hearing on the settlement over the trinkets' ownership is scheduled for April 8. Under the agreement, Lehman will repay Barclays $33,880 for warehouse costs.
Lehman filed the largest bankruptcy in U.S. history in September with $639 billion in assets. Chief Executive Officer Bryan Marsal told
in January that the firm has about $200 billion in unsecured liabilities left to pay. Barclays, the third-biggest U.K. bank by assets, paid $1.75 billion for Lehman's North American brokerage and real estate following the investment bank's collapse.
According to court papers, Lehman will not be able to sell the objects to Barclays' employees. Instead, it will most likely hire a liquidator for the knickknacks, although experts say
would probably be the better option because a liquidator would likely charge a fee for selling the merchandise.
If Lehman does end up auctioning off its baubles online, we at The Five Dumbest Lab look forward to bidding for one of those engraved wine openers. Nothing could please us more than to raise a glass in honor of the once-proud investment bank-turned-subprime casualty.
Our toast: They used to sell junk bonds. Now they just sell junk.
Dumb-o-meter score: 85 -- My investment bank went bankrupt and all I got was 682 coffee mugs and 30 teddy bears.
Furniture CEO's Comfy Deal
In all the hullabaloo over executive pay, folks may have missed the one about the unprofitable furniture maker whose CEO gave himself a raise.
paid CEO Ralph Scozzafava $3.8 million in total cash compensation last year, including a 7% salary increase, according to trade magazine
Scozzafava pocketed the hefty pay package despite sales falling 16.3% at the St. Louis-based company to $1.74 billion in 2008, and a net loss of $415.8 million on continuing operations, a mere eight times its 2007 loss. In December, the company eliminated 1,400 jobs, or about 15% of its remaining U.S. workforce.
Scozzafava joined the company in June 2007 when the company's stock was above $14. The once-proud manufacturer of name-brands like Broyhill, Lane and Thomasville now trades for around 80 cents, and the company sports a piddling $40 million stock market value.
In a story about Scozzafava's bonus deal in Wednesday's
Wall Street Journal
, a company spokesman said "executive compensation decisions are made by an independent committee of the board of directors, which has been advised by global compensation consultant Towers Perrin."
In other words, it's the consultant's fault the company overpaid its CEO.
That answer had us scratching our heads a little -- OK, a lot -- so we rang up Furniture Brands International and asked them who hired those fair and impartial consultants. To which they kindly replied, "the board."
And who is the chairman of said board? You got it. Ralph Scozzafava.
Don't blame Scozzafava, though. He just hired the people who overpaid him.
Boy did they do their jobs well!
Dumb-o-meter score: 80 -- This furniture company has no legs to stand on when it comes to compensation
Sex and the CEO
George David used to be the CEO of a multibillion-dollar company. Now he's a Page Six punch line in the
New York Post
As much as we tried to avert our eyes from the train wreck that is the divorce trial of the former
CEO, the daily tabloid headlines ultimately made it impossible for the Five Dumbest Lab to ignore how a captain of industry could look so asinine, not to mention sleazy, in a Hartford, Conn., courtroom.
The 66-year-old David, who retired as United Technologies' chief executive last year but remained chairman, wants a judge to enforce a 2005 postnuptial agreement he made with ex-wife Marie Douglas-David, 36, to give her $43 million when they divorce.
Douglas-David, on the other hand, says she has nearly $54,000 a week in expenses and wants the judge to declare the agreement invalid, saying she was coerced into signing it. The statuesque Swedish countess is seeking almost $100 million from David, whose net worth is estimated to be $330 million. She is also demanding $130,000 a month in alimony and nearly $390,000 in legal fees, as well as pricey jewelry, a pair of Mercedes-Benz automobiles, real estate in Sweden and assorted personal property.
We at The Five Dumbest Lab sympathize with Douglas-David's plight entirely. It's hard for a girl to live on less than $100 million nowadays. And she grew accustomed to flying across Europe on the United Technologies jet, at shareholder expense of course, so why should she have to go back to flying, yech, first class?
And as for finding a new sugar daddy as pliable as our boy George? Well, that may be near impossible now that intimate details of her wild spending habits and wilder sex life have been laid bare for public viewing.
We say, "You go girl!" Somebody needs to teach these silly CEOs a lesson. Better you do it now than risk subjecting some other poor Swedish countess to George and his hapless ilk.
Dumb-o-meter score: 75 -- George David, we hardly knew ya! But we sure do now.
AIG Goes Undercover
is hiding its stupidity in plain sight.
In its latest attempt to clear its name, the embattled insurer has decided to change part of it. AIG said this weekend it plans to rename its property casualty business AIU Holdings Ltd. The company looked back to its founding in 1919 in Shanghai for the new but not-so-different moniker:
American International Underwriters
. Earlier this month, AIG announced plans to spin off about 20% of this particular business in a public stock offering, and could sell off more over time.
This is not the first AIG division to change its title since AIG's bailout last September. AIG's U.S. auto insurance unit, for instance, changed its name in January back to 21st Century, the name it used until 2007 when AIG, already a majority owner, acquired 100% of the company.
The most recent name change was foreshadowed last week when AIG CEO Edward Liddy told a U.S. House of Representatives subcommittee that "the AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it."
This has us confused as to why a company so "thoroughly wounded and disgraced" would just change a single letter in its title as opposed to making a wholesale change. Clearly, switching from AIG to AIU on the building is not going to fool anybody.
And after spending $165 million in bonuses to people who didn't deserve it, we certainly don't believe that the company is trying to save money on the signage. Maybe a better name would be IOU.
Dumb-o-meter score: 90 -- Take note, AIG: Stupidity by any other name is still 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.