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The Five Dumbest Things on Wall Street This Week

Verizon vitriol; Bausch backslide; Tenet tangle; Vitesse vexed; GM's book learning.

1. Freedom Rings


(VZ) - Get Report

has found its calling.

The New York telco and rivals

TST Recommends


(T) - Get Report




have been getting belted around over government telecom monitoring.

USA Today

reports that the three big phone companies have allowed the National Security Agency to secretly collect Americans' calling records.




, under the

courageous leadership of

now-indicted CEO Joe Nacchio, declined to play,

USA Today

reports. That left the other Bells scrambling to profess their purity.

"Based on our review to date, we have confirmed no such contract exists and we have not provided bulk customer calling records to the NSA," BellSouth said. "If and when AT&T is asked by government agencies for help, we do so strictly within the law and under the most stringent conditions," AT&T told

The Wall Street Journal



as usual, the strongest comments came from Verizon.

"Verizon does not, and will not, provide any government agency unfettered access to our customer records or provide information to the government under circumstances that would allow a fishing expedition," the company said last Friday.

No one wants one of those, obviously. But evidently something still smelled fishy to Verizon, so on Tuesday, it

noted once more that it stands above the fray.

In doing so, Verizon reminded us that it isn't just a telecommunications giant. Why, it's a fearless defender of our freedom.

"Verizon always stands ready ... to help protect the country from terrorist attack," Verizon thunders in a second press release on the subject. "We owe this duty to our fellow citizens."

Right on. As Rudy Giuliani famously said on the morning of Sept. 11, "I'm sure glad Verizon is my phone company."

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Dumb-o-Meter score: 93. OK, maybe it was President Bush he was glad about, but we still feel safer now.

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


2. Dropouts

Bausch & Lomb


finally blinked on ReNu with MoistureLoc.

The Rochester, N.Y., eye-care company

recalled the contact lens cleanser this week after a long series of setbacks.

Last month, Bausch pulled U.S. MoistureLoc shipments as regulators probed its link to a potentially blinding fungal infection called Fusarium keratitis. Bausch had earlier pulled shipments in Asia when cases of the fungal infection turned up there. Yet the company maintained that there was no evidence that MoistureLoc contributed to the infections -- despite Center for Disease Control data showing most infection sufferers had used the product.

"Bausch & Lomb believes that the root cause of these infections is not related to a specific contact lens or lens-care product," the company said in a March 31 release pledging to get to the bottom of the mess.

But now, in light of additional infection reports and further testing, Bausch has seen the light. The company "has proposed that unique characteristics of the formulation of the ReNu with MoistureLoc product in certain unusual circumstances can increase the risk of Fusarium infection," the Food and Drug Administration said this week.

Bausch put the recall in slightly different terms. "Bausch & Lomb's top priority is the safety of our customers, and we want them to have complete confidence in our products," CEO Ronald Zarrella said Monday.

Complete confidence doesn't seem to be in the cards right now.

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Dumb-o-Meter score: 88. "Bausch & Lomb is working with eye-care practitioners to launch new programs that will provide consumers with products and information for better eye health," the company said Monday, continuing its hygiene kick


3. Hangover


(THC) - Get Report

tribulations in San Diego have left it with a throbbing headache.

The Dallas-based hospital chain agreed to pay $21 million to

settle federal kickback charges at its Alvarado Hospital Medical Center. Tenet also agreed to divest itself of Alvarado after it spent three years defending the San Diego hospital in court. Two criminal trials in the case ended in hung juries that led to mistrials.

The feds accused Alvarado of improperly lining doctors' pockets in a bid to boost admissions. Tenet has long denied the allegations, claiming that doctor-relocation payments are commonplace. At times Tenet even took aim at prosecutors.

"I can't get into too many of the details of the Alvarado case, but I can tell you this..." Tenet general counsel Peter Urbanowicz said in a December 2004 conference call, "it is not only unfortunate, but it is wrong that a local federal prosecutor has sought to criminalize physician-relocation agreements, which are a long-established practice used by hospitals around the country to bring needed medical professionals to their communities."

But the company -- which has been eager to put the Alvarado case to rest so it can pursue a global settlement of other federal inquiries -- backed down after the feds

threatened the hospital's federal insurance standing.

So Tenet ended up paying the big fine and signing off on an "explanatory statement." In it, Tenet concedes that "certain host physicians had obtained excessive payments." It adds, despite Urbanowicz's strong words in the 2004 call, that "we have never disputed that there are aspects of how the recruitment program operated that are troubling."

"The Alvarado case has been a sobering event for Tenet," Tenet says.

Now there's a staggering admission.

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Dumb-o-Meter score: 85. No word on which of the 12 steps Tenet has embraced.

4. Challenging

The chips are down at




The Camarillo, Calif., semiconductor company

fired its CEO and two other execs Wednesday, as a stock-option scandal threatens to turn into a full-fledged accounting nightmare.

Vitesse said CEO Louis Tomasetta, CFO Yatin Mody and Executive VP Eugene Hovanec were terminated, as an internal probe of possible option backdating expanded to cover revenue-recognition issues and quarter-end cash reporting. Shares fell 26% in a day and have lost half their value in the two months since the

options mess was exposed.

Vitesse also got a default notice from its lender. Silicon Valley Bank takes issue with "an apparent failure to meet the liquidity covenants under the credit facility, certain alleged misrepresentations under the credit facility and a material adverse change in the company," Vitesse notes. "The notice also states that the amount outstanding under the credit facility currently exceeds the permitted borrowing base under the facility."

Small problem. If Vitesse fails to get a reprieve, or falls short in an effort to raise cash through an investment bank, "it would have a material adverse effect on the company's operations, liquidity and financial condition," Vitesse warns.

Sounds bad, but luckily the flacks know just what to say. This kind of situation is, in their lingo, just a challenge.

"This has been a very challenging time for the company," Chairman John Lewis explains in a press release. "The new management team has done an excellent job in a very short period of time to address the pending challenges to Vitesse."

"In spite of the recent challenges we face with respect to our financial reporting and other issues," adds new CEO Chris Gardner, "Vitesse remains focused on executing our strategic business plan to capitalize on the investments we've made."

Sounds like a good thing to focus on.

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Dumb-o-Meter score: 80. The real challenge is figuring out what else Vitesse might focus on.

5. Outcome Statement

General Motors

(GM) - Get Report

had the bean counters jumping this week.

Still smarting from last year's $10.6 billion annual loss, the automaker set plans Wednesday to

restructure its finance ranks.

Controller Paul Schmidt will retire later this year, and chief accounting officer Peter Bible will resign June 1 to pursue other career options. GM, which plans to combine the positions of controller and chief accounting officer, began a search for external candidates.

GM also hired turnaround firm AlixPartners to tighten its controls and generally shape up its bookkeeping.

"One of our key objectives in finance is to minimize risk," said finance chief Fritz Henderson. "To that end, we are moving quickly to make sure that we have a robust level of internal controls and systems in place -- and AlixPartners has tremendous expertise to support this initiative."

GM and Alix seem like a good fit. GM has been hit over the past year by a series of accounting missteps, including revisions to its quarterly results and a restatement dating back several years. The company disclosed last fall that its accounting methods were under investigation by federal regulators.

And AlixPartners' slogan, as noted on its

Web site, is "Change the outcome."

Unfortunately, weighed down by flagging sales and hefty overhead, GM has a much taller task: It needs to change the income.

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Dumb-o-Meter score: 75. Actually, GM recently did just that for its first quarter, when a late change in its accounting for a retiree health care settlement turned a $323 million loss into a $445 million profit.

In our

award-winning effort to enrich the reader experience, the Five Dumbest Things Lab now scores each item using our proprietary Dumb-o-Meter. This cutting-edge technology employs a finely calibrated, 100-point scale measuring sheer Dumbness, as calculated via a closely guarded secret formula.

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