Bausch & Bomb
The eyes have it -- fungal keratitis, that is

1. Eyewash

The optics aren't looking too good lately at

Bausch & Lomb

(BOL)

.

Fresh off some bruising accounting problems, the Rochester, N.Y., company got another black eye this week. Bausch & Lomb halted shipments of its ReNu with MoistureLoc contact lens solution as authorities probe a rare eye infection called fungal keratitis.

The Food and Drug Administration says the Centers for Disease Control has received reports of 109 cases of suspected fungal keratitis. Of 30 patients for which complete data were available, 28 were contact-lens wearers and 26 remembered which products they used, the FDA says. All 26 reported using ReNu solution, with five reporting the use of other products, too. Eight patients needed cornea transplants.

"The CDC data released today are both troubling and perplexing," CEO Ronald L. Zarrella said Monday, "as there is an apparent disproportionate representation of U.S.-manufactured ReNu with MoistureLoc in the underlying data."

The setback isn't the first for ReNu. In February, Singapore's health ministry said that of 22 people hit by recent fungal corneal infections, all but one had used ReNu multipurpose solution, Reuters reported. Bausch & Lomb stopped selling ReNu in Singapore that month.

Yet Bausch & Lomb insists there is no evidence its lens solutions are causing infections. Though retailers like Walgreen (WAG) pulled the product from their shelves this week, ReNu with MoistureLoc continues to look "as safe and effective as anything on the market," Zarrella claims. He adds that Bausch & Lomb stopped U.S. shipments of ReNu with MoistureLoc "in the interest of public health."

And indeed, the company has been a tireless public servant of late. "Bausch & Lomb Reminds Contact Lens Wearers of Importance of Proper Lens Care," read a press release Friday. The text offers helpful pointers like "Never put contact lenses in the mouth" and "Do not use cream soaps to clean contact lenses."

And while you're at it, pour that ReNu with MoistureLoc down the drain.

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Dumb-o-Meter score: 93. A spokeswoman rejects the notion that issuing lens-care instructions is unusual and says the company did so "obviously to underscore the importance of good hygiene."

To view Colin Barr's video take on Bausch & Lomb's entry in Five Dumbest this week, click here

.

Merck and Mire
Painkiller still exacting pain

2. From the Heart

The Vioxx debacle has

Merck

(MRK) - Get Report

living in the past.

An Atlantic City jury slapped Merck Tuesday with $9 million in punitive damages. Jurors say the drug giant showed a "wanton and willful disregard of another's rights" in the case of 77-year-old heart attack victim John McDarby, who had already won $4.5 million in compensatory damages. Merck pulled Vioxx, once a best-selling arthritis drug, in 2004 after research linked it to heart attacks.

Tuesday's ruling could have been worse: The Whitehouse Station, N.J., company had faced a potential punitive damages tab as big as $22.5 million. But the jury's finding that Merck misled regulators about the painkiller's risks could prove damaging in thousands of future Vioxx cases.

That fact didn't elude Merck's loudest foe, plaintiff lawyer Mark Lanier. Lanier took Merck to the cleaners last August in a Texas state case that returned a $253 million damage award, and he hasn't stopped crowing since.

"This is huge," Lanier, the lead plaintiffs' lawyer in the McDarby case, told

The New York Times

Tuesday. "Merck thought they were bulletproof in New Jersey. They just got hit with $13.5 million in damages for a 75-year-old diabetic who had a heart attack."

For its part, Merck disputes the decision's hugeness. "The jury heard irrelevant and prejudicial information from the plaintiffs' attorneys about Merck and an appeal will be our next step," huffs general counsel Kenneth C. Frazier. Moreover, Merck insists that its victory last week in a related case -- that of McDarby co-plaintiff Thomas Cona -- vindicates its defense strategy.

"This split verdict reaffirms our commitment to defending each case on a case-by-case basis," adds Frazier. "Merck is in this for the long term."

If this counts as a split, Merck's long term could end up being pretty short.

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Dumb-o-Meter score: 90. Asked if she had anything to say to Merck, McDarby's wife, Irma, responded: "The truth shall set you free."

Making a Skilling
In search of a reasonable explanation

3. Say Anything

Jeffrey Skilling's defense is under way.

The disgraced former Enron chief took the stand this week. Federal prosecutors accuse Skilling and another former Enron CEO, Ken Lay, of overseeing a massive fraud that eventually brought down the once-highflying energy trader. Lay is expected to testify in his own defense later this month.

Skilling and Lay have raised some eyebrows with their claim that no wrongdoing took place at the Houston-based company -- even though more than 20 other Enron defendants have already pleaded guilty. "I will fight those charges until the day I die," Skilling said this week. "I was aware of no illegal activity occurring at Enron," he said later in response to his lawyer's question.

Apparently that's not all Skilling was unaware of. Skilling, of course, is the guy who in early 2001 called an analyst an "a--hole" for questioning the company's accounting. This week he explained that he wasn't aware that was a bad thing to say.

"The now infamous 'a--hole' quote, sorry, was used as arrogance," Skilling said, The Wall Street Journal reports. "It wasn't meant that way."

Oh, and how was it meant? Skilling couldn't be reached for coherent comment on that one. "The short sellers were all over the stock and I was having a hard time explaining why Enron was a strong company," Skilling testified Monday. "I had lost credibility with the Street, meaning Wall Street."

No word on why that was. Fortunately, Skilling doesn't hold a grudge against Wall Street. Instead, he seems to claim that execs would have had no need to worry about, say, a big earnings shortfall like the one that sent Enron plunging in October 2001.

"If you had any reasonable explanation," Skilling insists, "the market would be just fine with that."

We're guessing the same can't be said of this jury.

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Dumb-o-Meter score: 88. "I was looking at the business in dark-colored glasses in some ways," Skilling ranted at one point.

Typical Nortel
Not exactly by the book

4. Haunted House

Believe it or not,

Nortel

(NT)

has managed to find another skeleton in its closet.

The Toronto-based networking gearmaker has spent years trying to kick its notoriously bad bookkeeping habits. But the company, already in the midst of its third earnings restatement in as many years, recently said it has discovered more revenue that will have to be wiped off the slate and recounted in future quarters.

Nortel said Thursday evening it had decided that "additional revenue recognized in prior periods will be restated and deferred to future periods." The comment came just a month after the company admitted it would have to restate hundreds of millions of dollars in revenue to fix timing issues.

Of course, bad timing is nothing new at Nortel. With hard-charging Motorola (MOT) alum Mike Zafirovski at the helm since last fall, fans have been eagerly awaiting a turnaround. But the stock has actually declined since Zafirovski's hiring, and progress has been hard to come by.

Earlier last week, Nortel lost out in the Alcatel (ALA) sweepstakes as New Jersey rival Lucent (LU) took the bait on a $13.4 billion merger of equals. Some observers say bookkeeping problems may have cost Nortel a chance to combine forces with Alcatel.

Still, Zafirovski hasn't been resting on his laurels: Just in the last week the company has opened a support office in Trinidad, unveiled a new sales branch in Toronto and hired

IBM

(IBM) - Get Report

veteran Dietmar Wendt to run its global services business.

"Dietmar knows what it takes to create and maintain a razor-sharp business focus on services," Zafirovski said this week. "His leadership and experience will be critical as we target growth in our revenue mix from services."

Maybe first Nortel can target getting its accounting right.

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Dumb-o-Meter score: 85. "This revenue is real," Zafirovski memorably said of the March 10 restatement round. It was just "recognized in the wrong periods." Small problem.

5. Rock, Scissors, Whiteboard

Bill Gates is sketching out a bizarre picture.The

Microsoft

(MSFT) - Get Report

founder muses about technology in the April 7 issue of

Fortune

. In a piece labeled "How I Work," Gates contends that what he calls the "digital workstyle" is finally about to bloom.

"Paper is no longer a big part of my day," the software billionaire reveals. "I get 90% of my news online, and when I go to a meeting and want to jot things down, I bring my Tablet PC."

It's that kind of fresh thinking that's behind every tech success story, no doubt. But Gates doesn't stop there. "If the entire week is very busy, it's the weekend when I'll send the long, thoughtful pieces of email," Gates enthuses. "When people come in Monday morning, they'll see that I've been quite busy -- they'll have a lot of email."

Good to know, though it seems everyone isn't equally enthralled. Hedge fund manager Jeff Matthews

writes on his blog that Gates' comments come across "as the self-impressed noodlings of a man in control of a very large, very rich and very powerful organization who appears to have lived almost frozen in time."

Perhaps most chilling is Gates' take on his favorite nondigital accessory.

"The one low-tech piece of equipment still in my office is my whiteboard," Gates writes. "I always have nice color pens, and it's great for brainstorming when I'm with other people, and even sometimes by myself."

Thanks, but we don't care to see what Bill Gates draws by himself with all the nice color pens.

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Dumb-o-Meter score: 80. "Another digital tool that has had a big effect on my productivity is desktop search," Gates declares.

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