Five Dumbest Things on Wall Street: Jan. 15

Welcome Back Koss Corp.

Welcome Back Koss Corp. ( KOSS), to that same old place that you laughed about.

Yeah, we may tease them a lot -- because we got them on the spot -- but stereo products maker Koss Corp. is once again trading on the Nasdaq. Shares of the Milwaukee-based Koss had been halted since Dec. 21, after the company's management became aware of unauthorized transactions by its vice president of finance, Sujata "Sue" Sachdeva. The stock stopped trading at $5.50 in December and now changes hands close to $4 a share.

Sachdeva has since been fired and should soon be indicted for embezzlement. The company, however, still has a lot of work to do to repair itself. Koss estimates that Sachdeva's illegal transactions amounted to more than $31 million since fiscal year 2005, nearly the size of the company's current market capitalization.

So what was Sachdeva spending all that dough on? Mostly high priced fashion goodies for herself. Law enforcement authorities seized at least 22,000 items -- including high-end women's clothing, shoes, handbags, and jewelry -- as part of the investigation, according to the company.

Oh come on! Did nobody at the company think it was a bit odd when Sachdeva showed up to work in a different pair of high-priced shoes every day? No offense, but we're talking about a small company in Milwaukee here, not Madison Avenue during Fashion Week.

Koss anticipates restating its financial statements, at least, for fiscal years 2008 and 2009, and the first quarter of fiscal year 2010 ending Sept. 30, 2009. The headphone maker also recently fired Grant Thornton as its independent auditor for missing Sachdeva's shenanigans.

That seems like the smart move to us. Even Arnold Horshack, Vinnie Barbarino and the rest of Mr. Kotter's Sweathogs could have spotted that scam a mile away.

Dumb-o-meter score: 75 -- Instead of an extensive audit, Grant Thornton gave Koss a note from Epstein's mother.

NBC Goes for the Bronze

Remember the 1980 Olympic hockey game when announcer Al Michaels famously asked, "Do you believe in miracles?"

Well, when it comes to NBC we don't, especially when it comes to the network's late night schedule.

After months of lackluster ratings and affiliate grumbling, NBC revealed last weekend its intention to reschedule "The Jay Leno Show" once the Winter Olympics begins next month. The plan is for Leno to leave his 10:00 p.m. time slot and return to his former home at 11:35 p.m. once the Olympic torch is lit on Feb. 12, according to NBC Universal Television Entertainment Chairman Jeff Gaspin. Under the new arrangement, Conan O'Brien would retain his job with "Tonight" but at the later hour of 12:05 a.m., while Jimmy Fallon's "Late Night" show would be pushed back a half-hour later to 1:05 am.

NBC debuted the "The Jay Leno Show," an hour-long, prime time show with a similar format to "The Tonight Show" in September. The show was primarily developed as a means to keep Leno from leaving the network.

For his part, O'Brien said Tuesday he won't go gently into a later "Tonight" show. The funnyman, who is suffering from his own ratings inertia, put out a statement on Tuesday (snarkily addressed to the "People of Earth") saying he would fight the move because "The Tonight Show at 12:05 simply isn't the Tonight Show." He also added that he is not speaking to other networks, despite swirling rumors in the media about News Corp.'s ( NWS) Fox network being an aggressive suitor.

You know who must find this hilarious? Comcast ( CMCSA). The cable company purchased majority control over NBC Universal from GE ( GE) in December, just in time to learn that owning the tubes piping programming into people's homes is a snap compared to dealing with talent that fills them.

And it's not like the Olympic flame will ignite profits either. NBC Sports chief Dick Ebersol said this week it expects to lose money televising the Winter Olympics from Vancouver next month, due to slow ad sales and the stiff rights fee NBC paid to broadcast the games.

"My goal is to keep Jay, Conan and Jimmy as our late-night lineup," said NBC's Gaspin.

That's what he calls going for the gold? To us it looks like NBC is simply stacking the podium with bronze medalists.

Dumb-o-meter score: 80 -- Somebody tell Arsenio Hall to start warming up in the bullpen. It's comeback time.

Google's China Challenge

The Chinese have Baidu ( BIDU) so they don't need Google ( GOOG). Nevertheless, they would be making a dumb decision if they let Google go.

Google, one of the world's fastest growing and game-changing technology companies, said Tuesday that it's no longer willing to censor its search results in China and is considering shutting down its Web site and its offices in the country. Google announced plans to meet with the Chinese government over the next few weeks to discuss the basis on which the company can "operate an unfiltered search engine within the law, if at all."

Google's statements were prompted by evidence that computer hackers had accessed the email accounts of Chinese human rights activists. Google also said it discovered that at least 20 other large companies from a wide range of industries were targeted by hackers.

"These attacks and the surveillance they have uncovered -- combined with the attempts over the past year to further limit free speech on the Web -- have led us to conclude that we should review the feasibility of our business operations in China," said David Drummond, Google's senior vice president, corporate development and chief legal officer, on the company's blog.

Wow! Unlike Yahoo! ( YHOO) which folded like a cheap suit over censorship in China, the gang at Google is making a moral stand on the Mainland. To which we here at the Five Dumbest Lab say, 'You go Google!'

Of course, Google derives a nearly immaterial amount of its $22 billion of annual revenue from its Chinese operations so it's not like it's giving up the keys to the kingdom. China represents about 1% of Google's sales, according to analysts' 2009 estimates. Given the size and rapid growth of China's Internet market, that portion is expected to grow this year.

No matter its true motive, Google is challenging the Chinese over their abusive practices and we applaud it. If the innovative tech giant pulls up its stakes and leaves China, then it's China's loss. We know stupid when we see it, and we hope the Chinese recognize that censorship is anything but a smart way to get ahead.

Dumb-o-meter score: 85 -- We don't think Google will leave China, but we admire Larry Page and Sergey Brin's brinksmanship.

Goldman's Tracks

Is it us, or shouldn't the braniacs at Goldman Sachs ( GS) know better by now than to send out emails that make them look like vampire squids?

A Goldman Sachs executive said the gold-standard investment bank profited by trading ahead of or against its own clients, according to the New York Times Wednesday. Thomas Mazarakis, who leads Goldman's fundamental strategies group, informed select clients in an email that his unit regularly offered investment ideas that the firm had already traded on. The Times also reported Mazarakis as saying that Goldman sometimes takes the other side of the trade, or betting against a particular financial product recommended by the investment bank.

"We may trade, and may have existing positions, based on trading ideas before we have discussed those trading ideas with you," the Times quoted Mazarakis as writing in the email.

He should have just said, "Heads we win, tails you lose." It would have sounded better.

And boy, the timing could not have been worse. Not only was Goldman CEO Lloyd Blankfein grilled about the banking crisis on Capitol Hill on Wednesday, but Goldman and the rest of Wall Street's biggest banks are currently being investigated by the Securities and Exchange Commission for bundling up and selling to clients dirty mortgage bombs while simultaneously betting they will blow up.

Goldman spokesman Lucas van Praag told the Times that Goldman has been "providing this disclosure, which we think is best practice, for a number of years and there is nothing new in the disclosure you were sent."

Curious thing how the "best practice" at Goldman so often means the perfect storm for everybody else.

Dumb-o-meter score: 90 -- Is Goldman losing its golden touch?

Arbitron CEO's Absence

Here's a lesson for former Arbitron ( ARB) CEO Michael Skarzynski: Better rate than never.

Arbitron, which supplies radio ratings information to advertisers, revealed that Skarzynski resigned Monday because of false statements he gave to a congressional committee. The company said Skarzynski told the House Oversight and Government Reform Committee in a hearing last month that he had participated in a home visit to Arbitron panelists in November. The truth, however, is that while company officials did make the visit, Skarzynski played hooky. Arbitron's stock closed down $2.55 on the news, or 9.6%, to $24.15.

Remember that old Woody Allen quote that "80% of success is showing up"? It turns out a full 100% is necessary when it comes to keeping your job.

Arbitron is under Congressional scrutiny over its new method of tracking radio audiences called the Portable People Meter. Critics say it undercounts minorities and therefore lessens the advertising dollars smaller stations can attract. Arbitron has settled lawsuits from attorneys general in New York and New Jersey over the People Meter, but still faces lawsuits from a handful of states.

"Honesty and integrity are the cornerstones of Arbitron's values, and we take any acts inconsistent with these values very seriously," Arbitron CFO Sean Creamer said on Tuesday.

Arbitron said Skarzynski will be replaced by Bill Kerr, who previously led the magazine and broadcast company Meredith Corp. ( MDP). Kerr still serves as Meredith's chairman, but said he has asked the company to find a replacement.

And for everybody's sake, Kerr's replacement better darn well show up for work.

Dumb-o-meter score: 95 -- Another lesson for Skarzynski: It's OK for Congress to lie to you, but don't you dare lie to Congress.

Before joining, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.

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