Swanson Song and Dance
Written 'Unwritten Rules'

1. Booklet Learning

Raytheon

(RTN) - Get Report

threw the book at CEO William Swanson this week.

The Waltham, Mass., defense contractor docked Swanson's pay in a plagiarism scandal. Swanson will have to struggle by without a raise on last year's $1.12 million salary, and he'll miss out on 20% of his restricted stock award.

The board delivered this swift wrist slap after it figured out that the rules in the CEO's widely read pamphlet, Swanson's Unwritten Rules of Management, indeed had been written down -- but by other people.

Media reports indicate Swanson's supposedly homespun observations borrowed, without attribution, from authors including the late UCLA engineering professor W.J. King, humorist Dave Barry and Defense Secretary Donald Rumsfeld.

Until late last month, Swanson enjoyed fawning press coverage of the free booklet, which Raytheon reportedly mailed to more than 250,000 people. But on Wednesday, the board moved to express its "deep concern over the disclosures involving The Unwritten Rules."

"The Board noted that Mr. Swanson, appropriately, has taken full responsibility for the issues associated with the source materials, sincerely apologized to all involved and discontinued any further distribution of the booklet," Raytheon's lead directors said. The board adds it has "full confidence in Mr. Swanson's leadership."

Swanson did indeed apologize Wednesday. But how sincere the apology was is open to interpretation, considering his initial response in an April 24 press release:

"This experience has taught me a valuable lesson -- new Rule No. 34: 'Regarding the truisms of human behavior, there are no original rules.'"

Not for Bill Swanson, anyway.

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Dumb-o-Meter score: 95. "Which rule do you personally find the most difficult?" USA Today asked in a hard-hitting Dec. 19 interview. The answer? "No. 14: 'Strive for brevity and clarity in oral and written reports.'" No mention of accuracy.

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

.

2. Cry Me a River

Bausch & Lomb

(BOL)

investors shed more tears this week.

Shares in the Rochester, N.Y., contact lens company

fell 14% over two days amid safety concerns over its ReNu cleaning solution. Reports emerged in Europe of a fungal infection linked to ReNu use. The company previously stopped shipping some ReNu solutions in the U.S. and parts of Asia after reports of so-called fungal keratitis infections.

Meanwhile, the U.S. infection toll

continues to mount. Of 58 fungal keratitis cases fully investigated by the Centers for Disease Control, 56 victims used contact lenses and 54 used a ReNu solution,

The Wall Street Journal

reports. That's up from 30 cases reported last month. The government continues to probe the matter.

Still, Bausch insists that the numbers don't tell the whole story. While the company seems to have backed away from peddling

helpful hygiene tips, Bausch & Lomb remains steadfast in claiming that "preliminary data require further examination and should be placed in proper context."

And what's the proper context? Why, "Studies suggest that Fusarium keratitis occurs among contact lens wearers at a low rate," Bausch says.

That news will surely relieve the many keratitis victims who used ReNu.

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Dumb-o-Meter score: 91. "Bausch & Lomb continues to fully cooperate with the U.S. Food and Drug Administration and the CDC in a comprehensive investigation to determine the root cause of the unusual incidence of fungal keratitis," the company assures readers.

Say Cheesy
To Kodak, two negatives equal a positive

3. News Flash

Kodak

(EK)

knows how to put a happy face on the gloomiest development.

The Rochester-based picture giant posted its sixth straight quarterly loss Thursday and named the latest victims of its endless downsizing. Kodak is trying to bounce back from a long year of profit shortfalls and accounting mishaps.

Come Thursday, analysts were crossing their fingers for a small first-quarter profit. But what Kodak delivered instead was a loss of $1.04 a share, twice as wide as last year's first-quarter deficit. In addition, three top execs will depart and the company will try to sell its profitable health care imaging business.

"These are all important steps toward completing the creation of the new Kodak," CEO Antonio Perez said.

Another important step might be for the company to get its profit-and-loss terms straight. Perez, who last year ended Kodak's practice of giving earnings guidance, pointed to the quarter's 29% year-over-year gain in digital sales as a bright spot.

"Digital earnings improved, compared to the same period last year, and that improvement accelerated during March, which increases our confidence for a solid full-year performance," Perez said in a Thursday morning press release.

The digital operation's results did improve, but earnings were nowhere in sight -- except perhaps in the minds of Kodak flacks. "Digital earnings were a negative $37 million, compared with a negative $51 million in the year-ago quarter," the press release reports.

Negative earnings? Sure. At Kodak, they're never at a loss for words.

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Dumb-o-Meter score: 88. Not a pretty picture, guys.

4. Spaced Out

XM Satellite Radio

(XMSR)

is fading fast.

Shares in the Washington, D.C., pay-radio broadcaster have lost a third of their value this year amid a spending death march pitting XM with rival Sirius (SIRI) - Get Report. This year's selloff has put XM's market value some $2 billion below that of Sirius, even though Sirius remains far behind in both revenue and subscribers.

XM's free-spending ways grabbed headlines back in February when director Jack Roberts quit the board due to "a significant chance of a crisis on the horizon." Sirius, of course, joined the ranks of the hopelessly profligate more than a year earlier when it forked over $500 million to sign up shock jock Howard Stern.

Further burdening XM this week was a lawsuit filed in federal court in Washington. The suit accuses XM of misleading investors with a promise to cut subscriber acquisition costs and deliver on a target of 6 million subscribers. The suit also claims execs led by CEO Hugh Panero sold into the good news, at the expense of outside shareholders, to the tune of an $11 million gain for Panero.

XM shrugs off the allegations, saying the suit has no merit and that the company will defend itself vigorously.

Of course, anyone who bought XM ignorant of the company's massive cash burn deserves not damages, but unending scorn. Still, is it possible that XM -- home of Opie & Anthony and Bob Dylan -- has spent even more recklessly than Sirius?

Now that's a charge that might stick.

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Dumb-o-Meter score: 85. Of course, the race is still on -- Sirius signed Deepak Chopra this week.

5. Time Warp

Better late than never is the motto at

Elan

(ELN)

.

The Irish drug company posted its

latest quarterly loss Thursday. But a return to the black is in sight, as sales of multiple sclerosis treatment Tysabri should soon resume.

Regulators on both sides of the Atlantic have recently moved toward letting the drug back onto the market, following an extensive safety review. Elan and

Biogen Idec

(BIIB) - Get Report

pulled Tysabri in 2005, citing an apparent link to a serious brain illness.

Resuming sales of Tysabri would help both the companies and multiple sclerosis patients everywhere. Elan says the drug is twice as effective as any other MS treatment on the market. Elan says it hopes to get Tysabri back on the market next quarter, after a June 28 FDA vote by the Food and Drug Administration (FDA).

"We remain committed to making Tysabri available for patients in the United States and Europe and are confident that, with the financial leverage we have created over the last year, revenues from Tysabri will accelerate our return to profitability," says finance chief Shane Cooke.

Now Elan and Biogen are working with the FDA to finalize proposed drug labeling and a risk-management plan, a "meaningful, challenging and important process," Elan CEO Kelly Martin said on a conference call Thursday.

Martin certainly seems to have changed his tune a bit since last year. It was he who

raised eyebrows shortly after Tysabri got yanked by saying a

realistic timeline would put Tysabri back on the market in the second half -- of 2005. Later, Martin said he hoped to have Tysabri sales going again by the second quarter of 2006.

Come July, we assume Martin will be saying he wasn't wrong about Tysabri's return -- just early.

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Dumb-o-Meter score: 80. Perhaps Elan just got a little bit ahead of itself.

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