You know, we're big fans of the Supreme Court. The wisest judges in the land and all that. Just keep them the hell away from our investment portfolios, would you?


Yup, that's what occurred to us this week after the Supreme Court issued a landmark ruling related to rules governing local telephone carriers. And as she has on phone industry cases for several years, Justice Sandra Day O'Connor recused herself because of her stock holdings in AT&T (T) - Get Report and WorldCom (WCOM) .

Ouch. If ever there were a case against buy-and-hold investing, you'd have to put those companies at the top of your list.

Admittedly, we're in the dark here because we don't have the time or budget here at the Five Dumbest Things Research Lab to head down to the U.S. Courts' Office of the Committee on Financial Disclosure in D.C. and peruse Justice O'Connor's annual financial disclosures. We don't know which year she bought her AT&T and WorldCom (or WorldCom-owned MCI) shares, so we can't guess at what price she bought them. Nor do we know if the holder of the stock in question is O'Connor herself or a member of her family.

But what we do know from an old

Associated Press

clipping is that at least someone in the O'Connor family was holding shares in both AT&T and WorldCom as of Dec. 31, 1999. So let's say that O'Connor, or someone awfully close to her, owned $10,000 in AT&T stock in 1999 and $10,000 in WorldCom. Those stakes are now worth $3,600 and $237, respectively.

Yes, not only is justice blind, but as far as the stock market goes, it can't tell a turkey if it bites her on the nose.

2. No Audit Plaudits

We're all for

Adelphia Communications'

(ADLAE)

decision to get some outside help. But maybe it didn't go far enough outside.

Adelphia, of course, needs all the help it can get right now. The debt-laden cable television system operator has spent the past few weeks digging itself deeper and deeper into a mess first disclosed in late March, when the company shocked Wall Street by revealing it was potentially on the hook for $2.3 billion borrowed by its controlling shareholders, the Rigas family of Coudersport, Pa.

Numbers Crunch John J. Rigas

At the heart of the problem are the company's financial statements. Already, Adelphia says it will have to restate its numbers for the past three years, including a pesky $1.6 billion in debt, as of Dec. 31, 2001, which the company didn't have on the balance sheet when it talked to analysts in late March. Not only that, but the company is six weeks late and counting on its 2001 annual report, on account of a slow-moving and now suspended audit by accountants Deloitte & Touche.

So when Chairman, CEO and Rigas patriarch John J. Rigas steps down in favor of what he calls "fresh, independent leadership" at the helm, to whom does Adelphia turn to extricate itself from the audit-related mess?

Why, the head of Adelphia's audit committee, of course! Erland "Erkie"Kailbourne, that is -- the guy who since mid-2001 has been responsible for monitoring Adelphia's financial reporting "on behalf of the board of directors and the investing public," according to Adelphia's proxy filing last year.

Hmm. Makes sense. Oh, about as much sense as appointing Mrs. O'Leary to be head of the Chicago Redevelopment Commission a few weeks after her cow kicks over an oil lamp.

An Adelphia spokeswoman had no comment.

3. I Can See Clearly Erroneous Now the Rain Has Gone


The road to Dumbness is paved with good intentions, as we learned from RediBook recently.

RediBook, the electronic communications network that merged earlier this year with the ECN Archipelago, was proud to announce that it was proceeding apace on its efforts to integrate its operations with Archipelago's. So when RediBook hit a milestone -- one in which it adopted Archipelago's policy for dealing with obvious mistakes in orders, RediBook's execs trumpeted their achievement from the rooftops.

Of course, we wouldn't have phrased it quite the way they did, but you've got to admit they came up with a memorable headline:

"RediBook Adopts Archipelago's Clearly Erroneous Policy."

4. Poison Pension Letter

All hail

E*Trade

(ET) - Get Report

CEO Christos Cotsakos,

whom we chided last week for taking an $80 million pay package for 2001 as his company swung to a $241 million loss.

Heeding the cries of anguished stockholders, Cotsakos announced late last week he was giving back about $20 million of that money. So forget about his earning more than quadruple what his counterparts got at Goldman Sachs and Merrill Lynch; now his salary is just more than triple theirs.

One must be grateful for small favors.

Of course, executive overpayment horror stories are like pop-up ads on the Internet: Once you swat down one, another rears up in its place.

In Bernie They Trust?

Which brings us to that old reliable: Borrowin' Bernie Ebbers, ex-CEO of WorldCom. Contrary to rumors, Ebbers will indeed have to pay off the hundreds of millions he owes the troubled telco. But it's on pretty good terms, as WorldCom revealed this week. The interest on the $408.2 million he now owes is running at a sweetheart 2.3%; the principal payments, stretching out over five years, are heavily weighted toward the back end of the deal, giving Bernie plenty of time to get his house in order.

But there's more. With CEOs, of course, there's always more. Unlike other WorldCom employees who have seen the value of their holdings in the company fall, Ebbers will enjoy a comfy cushion. He gets a $1.5 million annual pension for life, medical and life insurance benefits, and limited use of company aircraft. (He loses the pension if he doesn't pay back his loan.)

Nice nonwork, if you can get it.

5. Let's Get Busywork!

But let's say you're not Bernie Ebbers. How much money can you drum up sitting around and doing nothing?

Oh, a few billion dollars, give or take.

That's what we learned this week as we read the continuing stories about the energy trading business -- an industry we would suspect didn't exist at all were it not for a bunch of cranky Californians complaining about their utility bills.

On Wednesday,

CMS Energy

(CMS) - Get Report

confessed -- as had

Dynegy

(DYN)

and

Reliant Energy

(REI) - Get Report

before it -- that it spent a lot of time in recent years engaging in meaningless energy trades in order to pump up volume and revenue figures. In fact, about 78% of trades in 2000 and 72% of trades in 2001 were fictitious. About $3.4 billion of revenue originally on the company's books in 2001 came out of thin air.

Sounds like the perfect job, this sitting around all day while not working 70% of the time, so we're applying for work at CMS straight away. After all, we at the Research Lab have plenty of relevant experience.