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Hey, Are You Listening?
Greenberg says he's ready to share

You know what the worst thing about this accounting mess at



is? It's making Hank Greenberg feel like he's being ignored.

New York-based AIG now says it expects to restate earnings to the tune of $2.7 billion. The company this week said it had found deals that took place solely to boost earnings, and fingered a financial setup that let top execs flout internal controls. The problems occurred during Greenberg's nearly 40-year reign as the insurer's iron-fisted CEO.

The announcement came as new CEO Martin Sullivan works with regulators to iron out the kinks in AIG's books. "We now know that there were serious issues with our internal controls, and that it is necessary for us to address those issues and strengthen our controls," Sullivan said. AIG said it will be tardy in filing its annual report.

Greenberg, of course, left AIG in March after investigators started probing his role in a questionable reinsurance deal with General Re. He refused to answer regulators' questions, complaining that the government failed to share documents with his lawyers. AIG's former financial chief, Howard Smith, was fired last month after he also declined to answer questions.

But this week, Greenberg renewed his protest against the "vile accusations" being made. He added that he and Smith really are in a sharing mood -- if only someone would ask.

"AIG's announcement that it is issuing a restatement of its financial statements was made without consulting former management or providing an opportunity for them or their counsel to provide relevant input," Greenberg bridled in a Thursday letter to AIG's board. "How a conclusion can be reached that unsupported 'top level' adjustments allegedly were made, without soliciting information on this subject from the prior chief financial officer or his counsel, is beyond my comprehension."

Maybe someday Hank will comprehend that no one at AIG needs his permission anymore.

Out With the Old ... Wait a Second
New Merck CEO starts, and so does the old one

2. Last Train to Clarksville



is ready to put the Ray Gilmartin era behind it.

On Thursday, the drug giant tapped manufacturing chief Richard Clark to replace Gilmartin, its embattled CEO.

Gilmartin, who had planned to stay through 2005, chose to step down immediately once a successor emerged, Merck says. The sudden change surprised Wall Street, but "in no way" was Gilmartin forced out, board member Larry Bossidy says.

Still, you could hardly blame Merck for wanting to take action. Gilmartin, who took the CEO post in 1994, came under fire last fall for his handling of the Vioxx crisis. Investors also took aim at Merck's weak stock and its problems in replacing big-selling drugs.

Vioxx lawsuits are now being heard, saddling Merck with billions of dollars in possible liabilities. Other problems surfaced on Gilmartin's watch as well: Merck said last spring it could face a massive back-tax bill, and last summer it outlined shortcomings in cholesterol-buster Zocor.

So where does this leave Gilmartin? Why, he'll be offering the board his sage advice for another 10 months. Until his retirement next March at age 65, Merck says Gilmartin will be "providing expertise in the areas of global public policy, government and regulatory affairs, and charitable contributions."

Considering Merck's recent track record, we're sure the value of Gilmartin's expertise won't be lost on the board.

3. Junkyard Dogs






may be bitter rivals, but they can agree on one thing: They don't like seeing their bonds consigned to the junk heap.

On Thursday, S&P slashed its ratings on Ford and GM debt to noninvestment grade levels. The bond rating agency cited GM's competitive problems and Ford's declining sport utility vehicle business. S&P questioned management's turnaround plans at both companies. Both stocks slid sharply.

The downgrade itself could hardly be described as a shock. Bond buyers have been demanding higher interest rates from the companies because both have slashed earnings guidance and handed out other bad news this spring.

Still, the timing came as a bit of a slap in the face, as Wednesday brought Detroit its first good news in who knows how long. Investor Kirk Kerkorian's announcement that he wanted to buy more GM stock sent GM shares up 18% and Ford up 7%.

"We are disappointed with S&P's decision to lower the credit rating of both GM and GMAC," said GM's Jerry Dubrowski. "Clearly GM has many challenges in North America, but the company is moving aggressively to address these challenges."

"We disagree with S&P's action today," added Ford CFO Don Leclair. "We're disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products."

Unfortunately, there's no sign that either of these companies is going to stop disappointing investors anytime soon.

4. Icahnoclastic

We're starting to get the feeling



isn't too crazy about its biggest shareholder.

That's none other than the outspoken billionaire investor Carl Icahn, of course. He has criticized Blockbuster CEO John Antioco for everything from his pay to his strategy for reviving the struggling video store chain. Icahn has indicated he wants to try to sell the chain or make it pay a big dividend.

Last week, Antioco shot back by threatening to quit and brandishing his

golden parachute.

A lot of good that did him. On Thursday, the two faced off on Blockbuster's earnings call. Icahn told Antioco to forgo his bonus, which he put at $50 million last year. Antioco said most of last year's bonus was in stock and added that it's up to the board to set pay.

And then,

Dow Jones

reports, Blockbuster cut Icahn off. The operator said the earnings conference call wasn't the appropriate forum for the discussion.

A spokeswoman for Blockbuster, which lost $58 million for the

first quarter as revenue rose 3%, says the surprise isn't that Icahn got cut off, considering some of the things he was saying. The surprise, with Blockbuster and Icahn locked in a nasty proxy fight, is that he got on in the first place.

Blockbuster's Karen Raskopf says CEO Antioco indicated ahead of the call that Icahn should be heard out, as long as his comments didn't head toward a "political stump speech." It was only when Icahn's remarks started getting political that he was cut off, she says.

Anyway, you'd think that given Blockbuster's dismal numbers, the company would have thanked Icahn for providing a distraction rather than cutting him off.

Take My Rate Hike, Please
You hear the one about inflation?

5. Party Time!

Making merry isn't Alan Greenspan's main job. But that didn't stop him from throwing an impromptu surprise party for the market Tuesday afternoon.

By now, Wall Street takes it for granted that every six weeks the Federal Open Market Committee will raise its interest-rate target by a quarter of a percentage point. This has become such conventional wisdom that no one much debates the rate move itself anymore. Instead, traders focus on the jargon-laden policy statement.

Lately, the Fed's hot-button words revolve around "measured" interest rate hikes and "well contained" inflation risks. So you can imagine what happened when the Fed omitted the customary statement that "long-term inflation risks remain well contained."

Why, stocks sold off, that's what happened. The Dow Jones Industrial Average was down about 50 points heading into the last 10 minutes of trading.

That's when funnyman Greenspan let everyone in on the punch line. The Fed put out a "corrected" statement that included the line about longer-term inflation risks remaining well contained. Stocks bounced back to finish basically flat.

So how'd the notoriously meticulous Federal Reserve manage to botch its own policy statement? Oh, it was just a little mistake, the Fed says: The line in question was dropped inadvertently.

Good thing the FOMC doesn't have to issue its boilerplate more often. My face is hurting from laughing so hard.

To watch Colin's humorous video take on the AIG matter,

click here.

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