Langone Job
Blender or Foes?

1. Defender of the Faith

Let's get this straight. Ken Langone's calling something unseemly?

That's how the Wall Street big shot recently characterized Goldman Sachs' (GS) - Get Report role in the pending merger of New York Stock Exchange and electronic trading house Archipelago (AX) - Get Report.

On the one hand, Langone -- an investment banker and Home Depot (HD) - Get Report founder -- has a point. He is far from the only one criticizing the investment bank.

After all, Goldman took the unusual step of advising both Archipelago and the NYSE in their pending merger. Some also point to the fact that NYSE CEO John Thain came over from Goldman. The investment bank's dual role strikes us as pretty brazen, notwithstanding Goldman flack Lucas van Praag's comment that "life is filled with conflicts, some real, some imagined."

He went on to tell

Bloomberg

that "in a situation where there is total transparency and the clients are happy, one would've thought the acid test had been passed."

By the way, Goldman owns 21 member seats at the NYSE, which have risen by $20 million in value because of the deal. Goldman and its subsidiaries also own 15% of Archipelago, a stake whose value has risen by $84 million. And Archipelago paid Goldman a $3.5 million advisory fee as well.

But what's really dumb is Ken Langone posing as defender of all that is right and good in business. After all, wasn't Langone the loudest backer of Dick Grasso's $139 million payday?

Wasn't Langone's Invemed

charged by securities regulators with unlawful profit-sharing activities involving hot IPOs between late 1999 and early 2000? Wasn't it Langone who once said to

Fortune

, "I'm nuts, I'm rich, and boy, do I love a fight. I'm going to make them s--- in their pants." He went on to say that when he got done with such captains of industry they'd "wish they were in a Cuisinart -- at high speed."

Sure, Invemed maintains it did nothing wrong and is fighting

the NASD charges. Sure, Grasso and Langone defend the bald guy's massive payday. Sure, there's no law against swearing in magazine interviews.

And there's no reason anyone should care about Ken Langone's definition of seemly.

Nortelling
Not exactly a Homeland home run

2. Security Blanket

Homeland security is no laughing matter. That's why we were a little surprised to see

Nortel's

( NT) acquisition plans this week.

The Brampton, Ontario, telecom-equipment company said Tuesday that it would pay $448 million for Fairfax, Va., government technology integrator PEC Solutions( PECS). PEC's customer base includes the Secret Service, the Office of the Chief Information Officer for Homeland Security, the Transportation Security Administration, the FBI and the Justice Department, among others.

Nortel assured investors on its Tuesday morning conference call that being based in Canada won't present a problem in completing the deal. Nortel said it and PEC will set up a separate company to eliminate any foreign-ownership worries.

But we think there's a bigger issue. Nortel has spent the last two years churning through an extensive financial restatement process in the wake of its so-called bonusgate scandal.

The bookkeeping problems have led the company to fall behind more than once on its required regulatory filings. In January, Nortel finally released its results for 2003, restating numbers to cut its reported profit by some $300 million.

That's not all. Earlier this month Nortel warned that it would

miss next month's deadlines for filing first-quarter numbers.

So here's a company that has spent the better part of two years checking its math, and it still can't file its quarter on time?

Yes, that's just who we want supplying technology to the Chief Information Officer for Homeland Security.

3. Flag Day

It looked to us like

Deloitte & Touche

was in serious denial this week.

On Tuesday, the company agreed to settle not one but two

Securities and Exchange Commission

enforcement cases. In one, Deloitte forked over an auditing-industry record $50 million to end a probe of the massive accounting fraud and corporate looting scandal that plunged cable giant

Adelphia

into bankruptcy. In the other, the firm paid $375,000 to settle a probe of its audit of

Just For Feet

.

As usual, the terms of the settlement called for Deloitte to neither admit nor deny

the SEC's charges. The firm's Tuesday morning press release said as much. But then it said this, too:

    In both the Adelphia and Just For Feet cases, the primary basis of the SEC's claim is that the wrongdoing by the client and certain members of its management should have been uncovered, despite their collusion in some instances with others specifically to deceive the external auditors. The client and certain of its senior executives and others deliberately misled Deloitte & Touche LLP through the financial information they provided. In the case of Adelphia, certain executives were found guilty of fraud, while in the case of Just For Feet, certain executives and third-party vendor employees agreed to plead guilty to fraud charges.

After the SEC complained, the company issued a notably more circumspect replacement press release Tuesday afternoon. It said in part:

    In both the Adelphia and Just For Feet cases, the primary basis of the SEC's claim is that the audits were deficient and failed to uncover fraud committed by the companies and certain members of their management in the face of identified risks.

A Deloitte spokeswoman says the company reissued the press release because the SEC disagreed with Deloitte's "characterization of the case." An SEC rep didn't return a call seeking comment, but an agency official told

Dow Jones

why the SEC was miffed.

"Deloitte was not deceived in this case," said Mark Schonfeld, the director of the SEC's Northeast regional office. "The findings in the order show that the relevant information was right in front of their eyes. Deloitte just didn't do its job, plain and simple. They didn't just miss red flags. They pulled the flag over their head and then claimed they couldn't see."

Oh Denny Boy
He goes where Bernie dare trod

4. Dennis the Menace?

Dennis Kozlowski lifted some eyebrows this week by deciding to testify on his own behalf. But we can't say we were surprised.

Kozlowski, the ex-Tyco (TYC) chief, is standing trial again in New York state Supreme Court. He faces grand larceny and securities fraud charges in connection with his lavish pay. An earlier case ended in a mistrial.

The decision to testify can be fraught with peril. Just look at Bernie Ebbers, the ex-WorldCom chief who was convicted this spring in a massive accounting fraud. His defense was skewered by prosecutors and unconvinced jurors alike.

Appearing in court Wednesday, though, Kozlowski didn't miss a beat. He did everything you'd expect from an accused corporate chieftain. He proclaimed his innocence. He spoke humbly of a trusted mentor. He admitted to having made a mistake or two.

Indeed, in place of Ebbers' widely discredited "aw shucks" defense, Kozlowski offers up an "oh well" strategy. Asked about a $25 million omission on his 1999 tax return, Kozlowski as much as shrugged. "I cannot explain why," Kozlowski said. "I was not thinking when I signed my tax return."

In some ways, that adds up. After all, who could ever explain the extravagances that Tyco shareholders ended up buying for Kozlowski, like

the $445 pincushion and the $15,000 dog umbrella stand?

Can't wait to hear what else Kozlowski wasn't thinking about.

Blockbusted
What Icahn they do?

5. Film at 11

Blockbuster

( BBI) CEO John Antioco really showed Carl Icahn a thing or two the other day.

Icahn is the billionaire financier who is the video-store chain's largest shareholder, with a 10% stake. He has generally characterized Antioco as an overpaid, free-spending bungler. Icahn says he believes Blockbuster should be sold and is mounting a proxy fight to put himself and two others on the company's board. He has said he will "attempt to take control of the board of directors in the 2006 annual meeting."

On Wednesday, Blockbuster fired back. Blockbuster said that if shareholders elect Icahn and his associates to the board, Antioco will quit as chairman. And don't think there won't be consequences, either.

"The company notes that removal of Mr. Antioco from the board chairmanship would constitute 'good reason' under Mr. Antioco's employment contract and could entitle him to receive the benefits provided in the contract including severance and accelerated vesting of equity awards," Blockbuster said in its release.

Yes, that's how you prove your CEO isn't overpaid or free-spending. You threaten to trigger his golden parachute.

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