2004: An Odyssey Health Odyssey
DOJ on the way

1. I'm Just Thinking of an Unrelated Thing

Employees sometimes find it hard to drag themselves into the office Monday morning. This week, though, it was a little harder than usual for one executive at

Odyssey HealthCare

( ODSY).

On Monday, the hospice operator issued a classic bad-news press release. It said third-quarter results would come below analysts' expectations. It lowered guidance for the year. And it announced that David Gasmire -- president since 2001 and CEO since January -- had decided to leave the company.

Odyssey's shares dropped 47% in a single day.

Oh, yeah -- there was another piece of bad news. "In an unrelated announcement," as the company put it deep down in its Monday morning press release, Odyssey disclosed that the Justice Department had begun an investigation under the False Claims Act. The probe covers payment claims submitted to the government since 2000 as well as patient admissions, patient retention and billing practices.

That's an "unrelated announcement"? You know, from the outside looking in, you don't have to be a conspiracy theorist to wonder whether Gasmire's departure had just a little something to do with the DOJ warning. But Odyssey says no. The DOJ's move "is totally unrelated to any management change here," Chairman Dick Burnham told analysts Monday.

Maybe he's right. Maybe the DOJ thing played no role in Gasmire's wanting to leave. On the other hand, we can't imagine it was something he wanted to stick around for, either.

2. Not Bad for a Day's Work

The big news at


( KMRT) this week was that President and CEO Julian Day resigned Monday.

Actually, the really big news was the going-away package that Day received after his two and a half years as president of the discount retailer chain: options worth as much as $120 million,

The Wall Street Journal


Hey, mom! Can I resign from Kmart, too?

Pay Day
No cut-rate deal for ex-CEO

Whether Day deserves all this money is up for debate, of course. He may be making a lot of dough, his supporters might say, but he made dough for shareholders too, leading the company out of bankruptcy and quadrupling its stock price over the past year.

What we remember is three years ago, when Kmart lent $30 million to executives as part of a pre-bankruptcy "executive retention program" -- a program that ended up in a mess of unretained executives and unpaid loans.

Yep, at Kmart they sure know how to get everything cut-rate. Except for an executive.

3. Some People Call Me Milhous

Last week,


(AIG) - Get Report

was caught up in Eliot Spitzer's probe of insurance industry sales practices. This week, it disclosed that a grand jury was investigating a previously SEC-investigated deal with telecom firm


( CELL).

You would sort of think that AIG CEO Maurice Greenberg has enough bad news to keep him busy.

But no, there's more: On Thursday, Greenberg had to endure the honor of a well-meaning analyst's indirect comparison of him to Richard Nixon.

Yep. That's exactly the kind of positive-spinning public relations this company needs.

"Back, I guess it was in 1974, you had Richard Nixon do something that was flawed, and it led to a change in U.S. government," Credit Suisse First Boston's Charles Gates analyst said during the question-and-answer portion of AIG's earnings call. "And that thing, the Watergate, amounted to nothing in total. ... Do you believe that there is any parallel there vs. basically what's occurring now with regard to either one, Spitzer, or two, whatever is Brightpoint?"

After Gates, plagued by a poor phone connection, repeated his question, Greenberg responded, "I do not believe that any of the current issues that have been raised will have a dramatic effect long-term on AIG."

Nixon's press secretary, let's recall, once dismissed the Watergate break-in as a "third-rate burglary." We'll have to wait and see to discover whether Greenberg is similarly accurate.

A Hard Sell Rating
A job offer they can't refuse

4. Working Hard? Or Hardee Working?

Publicly traded companies have different ways of getting angry at research analysts.

Sometimes they call up the analysts' bosses to complain about their coverage. Sometimes they freeze them out of conference calls.

But this week, CKE Restaurants( CKR) kicked it up a notch: The operator of the Hardee's chain, we learned, told authorities that one of the Wall Street analysts covering the company was engaged in an extortion scheme.

Yes, on Monday, the U.S. attorney's office in St. Louis said it had charged Clive Munro, operator of Wyoming-based Javelin Research, with extortion, wire fraud and securities fraud.

According to the feds, the alleged extortion stemmed from Munro's suggestion to CKE that the restaurateur hire him as a consultant. A few weeks after Munro issued a critical report on CKE, say prosecutors, he sent CKE's CEO an email reading in part, "If you were smart, you would hire me at $25K per month for 12 months ... and take me out of the game. Plus, you would have vastly improved your relations with investors, and you might have avoided some of the current problems with Hardee's. So far this year, this would have saved you $160 million in lost market value. That certainly beats shutting me out of asking questions on conference calls."

Hmmm. We can see how CKE might interpret Munro's actions as extortion. But we can also see how Munro is guilty of nothing more than aggressive marketing.

At different points in the prosecutor's chronology of events, Munro reminds CKE he'll soon issue negative research on the company if he's not hired as a consultant. But at other times, when CKE execs -- in cooperation with the FBI -- suggest Munro take other actions, he rejects them as illegal.

As for Munro himself, he suggests he's the victim here, not CKE. "I guess CKR management doesn't like people who have negative opinions," he told


, after keeping quiet when other news organizations called to chat. "Analysts, beware of following this company."

Declining to speak specifically about the charges, Munro defended his research on CKE and other restaurant stocks.

"We write very selectively," he said. "We almost never miss. We've got a fantastic track record. And it was our opinion that the business was slowing."

His earnings and comparable-store sales forecasts for CKE, says Munro, have been dead-on, though he said he was unable to supply the research lab with copies of his work. "They took my computer," he said. CKE execs didn't comment.

Well, we'll see how this all plays out in court. But in the meantime, we rest assured knowing that the relationship between analysts and the companies isn't always as cozy as it's cracked up to be.

5. Let's Make Something Perfectly Sinclair

Sinclair Broadcasting

(SBGI) - Get Report

learned a little about peace with honor this week.

The conservative-leaning broadcaster had courted controversy with reported plans to broadcast a documentary critical of John Kerry's Vietnam-era antiwar protests in the weeks leading up to the presidential election.

Critics argued that such a telecast would amount to a partisan giveaway of free advertising time to President Bush. Sinclair, for its part, argued that it hadn't even publicly announced what it was going to broadcast anyway -- though it did a singularly bad job of persuading people that it wouldn't be arguing that Kerry had committed the moral equivalent of treason back in the 1970s.

At some point after a Sinclair-related advertising boycott emerged online, what Sinclair termed press freedom began to look an awful lot like bad business. The company's ailing stock fell 11% Monday and Tuesday.

And then, when Sinclair indicated late Tuesday that whatever it would be broadcasting Friday (check your local listings for details) would have a watered-down version of the anti-Kerry documentary -- lo, things all got better. The stock erased prior losses.

We in the Wall Street business call it the Kerry trade.

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