Five Dumbest Things on Wall Street: Jan. 22

Gun Stunner

Something dirty is going on at Dirty Harry's favorite gunmaker.

Amaro Goncalves, Smith & Wesson's ( SWHC) vice president for sales, was one of 22 individuals indicted by the U.S. Justice Department Tuesday for violating federal bribery laws involving the sale of firearms. Goncalves and crew were charged with violating the Foreign Corrupt Practices Act and conspiracy to commit money laundering involving the sale of guns and body armor.

The indictments were filed in December after agents worked undercover last year to expose the ring. The individuals were arrested on Monday in Las Vegas and Miami.
AIG

Go ahead and make our day, because a Dumbest entry rarely gets cooler than this.

According to the indictment, an unidentified business associate who was a former executive for an arms manufacturer set up a meeting between Goncalves and two representatives of an unnamed African country's minister of defense. Little did he know, however, that the two men were really undercover FBI agents.

The agents informed Goncalves that in order to win a contract for the sale of guns he would have to tack on a 20% so-called "commission" to the price quotes to be split between the purported minister of defense and his supposed representatives. Goncalves complied by providing the inflated price quotes for two sales, a tiny 25-gun deal and a larger transaction encompassing 1,800 pistols.

Now, with all due apologies to Clint Eastwood, we just have one question for Goncalves while he awaits trial: Do you feel lucky enough to beat the rap?

Well, do ya, punk?

Dumb-o-meter score: 75 -- Goncalves really shot himself in the foot on this one. And with Magnum Force, too.

L'affaire Boeing

Boeing's ( BA) top man in France can't ink a deal to save his life, so there's only one thing left for him to say, " J'accuse!"

Yves Galland, the president of Boeing France, accused the country's politicians of protectionism in its arms market on Tuesday, according to Reuters. To prove his protectionist point, Galland revealed that French defense authorities forced him to abandon his attempts to forge partnerships between Boeing and two French companies over a futuristic defense project.

"I think France is extremely protectionist in military matters," said Galland, a former politician.
AIG

Sacre bleu! This guy really isn't going to be helping his case much if he keeps badmouthing one of his biggest customers, the French government.

Not that it would matter too much anyway. According to Galland, the French have not purchased any defense equipment from Boeing in 30 years, while the U.S. defense department has ordered hundreds of army helicopters from Airbus sister company Eurocopter.

And after this blow up, we expect they will continue to keep the American arms-maker a bout de bras. (Translation: "at arms length")

Dumb-o-meter score: 80 -- They don't want our weapons? Fine. Let them defend themselves with stale French bread and heavy sauces.

Carr's U-Turn

We sure hope everybody had their seatbelts on when Cadbury ( CBY) finally accepted Kraft's ( KFT) offer, because Cadbury chairman Roger Carr made one heckuva U-turn.

After months of denigrating Kraft's overtures, Cadbury agreed to an 11.5 billion pounds ($19.5 billion) takeover this week. The British chocolate-maker finally acquiesced to a raised bid of 840 pence ($13.78) per share, comprised of 500 pence cash and 0.1874 new Kraft shares for each Cadbury share. Kraft's winning bid is 9% higher than its previous 770 pence offer and a 50% increase over Cadbury's market value before Kraft launched its assault on the confectionary company last September.

"We believe the offer represents good value for Cadbury shareholders ... and will now work with the Kraft Foods' management to ensure the continued success and growth of the business," Carr said on Tuesday.
AIG

Wait a bloody second here! Isn't this the same guy who just last week called Kraft a "low-growth" company with a "long history of underperformance"? Isn't this the upstanding Brit who lit into Kraft CEO Irene Rosenfeld, by saying her shareholders had been forced to deal with "repeated disappointment from a management team who have promised much and delivered less"?

Boy, an extra 70 pence sure can change a guy! We can only imagine what he would be saying if Kraft gave him a full pound ($1.60) for his troubles.

In the end, Carr must have come to the conclusion that he had as much chance of Willie Wonka riding in to save his chocolate company than he did Hershey ( HSY) serving as his white knight. More importantly, Carr probably realized that Rosenfeld was close to figuring out that she was nonsensically bidding against herself and major Kraft shareholder Warren Buffett's better judgment.

Dumb-o-meter score: 85 -- Last month Carr warned shareholders not to let Kraft "steal your company." We guess he really meant was that for an extra few pence he would leave the keys in the ignition for let Rosenfeld.

AIG Strikes Again

AIG ( AIG) may be a multibillion-dollar liability to the U.S. taxpayer, but to the Five Dumbest Lab, the failed insurer is the gift that keeps on giving.

Berkshire Hathaway's ( BRK-A) General Re division agreed to pay $92.2 million on Wednesday to settle accusations that it "knowingly provided substantial assistance" to both AIG and Prudential ( PRU) in connection with their own securities violations. The U.S. government alleged that the reinsurer used fraudulent transactions to help manipulate AIG and Prudential's financial statements.

According to the complaint, General Re entered into two sham reinsurance transactions in 2000 that allowed AIG to falsely report increases in both loss reserves and premiums written. The SEC alleges they did this to shore up the company's financials after analysts criticized AIG for declining loss reserves.
AIG

Amazing. First we learn the hard way that AIG was taking credit default swap bets it could not cover. And now we discover that back in the day, their buddies at Berkshire were helping them prop the stock up with bogus deals.

Somebody please tell us, does AIG stand for "Another Incredible Gaffe" or what?

And this most recent revelation could not have come at a juicier time, considering the House Oversight and Government Reform Committee is meeting next week to find out whether the New York Federal Reserve -- headed at the time by now-Treasury Secretary Tim Geithner -- failed to disclose payments to banks as it sought to unwind $62.1 billion in credit default swaps.

Here's a good question for Mr. Geithner to kick off next week's AIG festivities on Capitol Hill: How on earth did you give $180 billion of our money to these clowns at AIG without knowing a darn thing about the company?

Yeah, that should get the proceedings off to a fast start.

Dumb-o-meter score: 90 -- We can't wait for AIG: The Movie. Who plays Benmoche? Bernanke? Hank Greenberg? Please make casting suggestions in the comments below.

Conan Cashes In

Want to hear a good one? Conan O'Brien walks into the "Tonight Show" to take over for highly rated Jay Leno. Eight months later, Leno takes back his old job and O'Brien walks away with a whopping $32 million.

Yeah, the jokes on you NBC (again). Not to mention your parents GE ( GE) and Comcast ( CMCSA), whose shareholders will be paying O'Brien for O'Brien's seven-month vacation if its deal is approved by regulators.

Why only seven months? Because according to O'Brien's exit deal, he will be free to begin another TV job as soon as September.
AIG

Man this just gets funnier and funnier. And wait, there's more.

More money, that is. That $32 million is just Conan's share for his abbreviated stint in Johnny Carson's old chair. NBC said Thursday that it will pay another $12 million to Conan's 200-strong staff in severance. Not a bad payoff for a show that got clobbered by CBS' ( CBS) late night star David Letterman. Imagine how much Conan would have pocketed had his ratings been good!

Leno -- whose own prime time show bombed -- will return to "Tonight" on March 1. As for Conan, his final show will be Jan. 22, with Tom Hanks scheduled to appear as well as Will Ferrell -- the first guest O'Brien welcomed as "Tonight" host last June.

Conan's final musical guest will be Neil Young. Maybe he'll rework his classic tune and sing: "I've seen the network and the damage done."

Dumb-o-meter score: 95 -- Leno bombs and gets the "Tonight" show. Conan bombs and gets $33 million. We wonder what Jimmy Fallon is thinking right now?

Before joining TheStreet.com, 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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