The 5 Dumbest Things on Wall Street: First Quarter

TheStreet combed through the, shall we say, April fool's gold that is our 5 Dumbest Things on Wall Street column to find the juiciest nuggets from the first quarter of 2011. Here are what we considered the top five foolish stories from the first three months of the year. We have no doubt there will be more -- much more --to come as the year continues.

5. Taco Bell's Mystery Meat

Originally published on Jan. 28 -- Yum! Brands' (YUM) Taco Bell faced one question in a potential class action lawsuit filed earlier this year -- Where's the beef?

According to a suit filed by law firm Beasley Allen, what Taco Bell is advertising as beef is more of a beef filling, with heavy emphasis on the filling. In fact, the suit alleges there is so little actual beef in the filling that Taco Bell shouldn't even be allowed to call it beef.

The U.S. Department of Agriculture defines beef as "flesh of cattle." The suit, which does not seek monetary compensation save for attorneys' fees and costs, claims that Taco Bell calls its products "seasoned ground beef or seasoned beef, when in fact a substantial amount of the filling contains substances other than beef." The suit claims that Taco Bell's ground beef includes ingredients such as water, isolated oat product, an anti-dusting agent, an anti-caking agent and modified corn starch, as well as beef and seasonings. As Rachel Ray would say, "Yum-O!"

Just 35% of what Taco Bell calls its "taco meat filling's" ingredient list was a solid and just 15% of it qualified as protein, according to attorney W. Daniel "Dee" Miles III of the Montgomery, Ala., law firm Beasley Allen.

Taco Bell spent the week vigorously responding to the suit, which grabbed more and more media attention as the weeks went on. A company representative said late in the week that "our seasoned beef recipe contains 88% quality USDA-inspected beef and 12% seasonings, spices, water and other ingredients that provide taste, texture and moisture."

Taco Bell probably should have been ready for this one as it has had bad luck when it comes to the quality, or perceived quality, of its key ingredients. Sister company KFC was said to have been forced to change its name from Kentucky Fried Chicken because it served genetically engineered meat that didn't qualify as chicken. Not true, but an urban myth that has persisted.

Whether Taco Bell wins the day in court, the damage may already have been done. But the KFC myth didn't hurt them too badly, and we don't think high school and college kids will stop making a run for the border any time soon.

4. Goldman's Recommitment Ceremony

Originally published on Jan. 14 -- So long Goldman Sachs ( GS), the inscrutable, all-powerful money-making machine. Hello Goldman Sachs, re-committed to being an all-powerful money-making machine.

Goldman dumped a 60-something page report on the public in early January after an extensive review of the company was carried out by something it calls its "Business Standards Committee." This is a newish committee made up mainly of Goldman Sachs executives, plus one or two people intended to add outside perspective, such as Wal-Mart ( WMT) Chairman Lee Scott.

The choice of Scott has a certain poetry to it. It's as if Goldman, not knowing or trusting any ordinary people it could consult with to see how its behavior affects them, figured it would talk to someone who got very rich by understanding how to sell stuff to ordinary people.

But Scott only knows one way to sell stuff to ordinary people -- make it really cheap. Goldman apparently took that advice to heart when writing up its report. It's filled with cheap phrases like "the firm's culture has been the cornerstone of our performance for decades," and "the Committee believes all financial institutions, including Goldman Sachs, bear responsibility for constantly improving practices and procedures relating to the marketing and distribution of structured products." How bold.

Like many Goldman documents, the report veers from emptiness into absurdity. Take the list of abbreviations. Among TheStreet's favorites are EMD for Extended Managing Director and TCM, for Transaction Class Matrix.

And the report would not be complete without a flash of the trademark Goldman arrogance.

"We believe the recommendations contained in this report represent a fundamental re-commitment by Goldman Sachs: a re-commitment to our clients and the primacy of their interests; a re-commitment to reputational excellence associated with everything the firm does; a re-commitment to transparency of our business performance and risk management practices; a re-commitment to strong, accountable processes that reemphasize the importance of appropriate behavior and doing the right thing; and a re-commitment to making the firm a better institution."

In other words: We took a look at what we were doing. Ah, that was refreshing. Now let's go do it some more.

3. KV Pharmaceutical Goes Price Hiking

Originally published on March 18 -- KV Pharmaceutical ( KV.A) won the exclusive rights to produce a shot that helps prevent premature births, and decided to celebrate by engaging in some serious price gouging. Thanks to KV, a shot that once cost about $10 will now cost $1,500. Why? Apparently, just because.

According to ABC News, KV's new arbitrary and blatantly greedy pricing strategy puts the cost of treatment over the course of a pregnancy at $30,000.

Astute pharma investors will no doubt point out that KV must have spent a lot of money for research and development of the product, so are justified to set the price. Except, as ABC pointed out, the shot has been around since 1958 and, in fact, we all made the outlay for development.

"All the upfront development of the drug was done by the National Institute of Health," Dr. Kevin Ault, associate professor of gynecology and obstetrics at Emory University School of Medicine, told ABC. "You and I paid for that with our tax dollars, it's not like this pharmaceutical company is trying to recoup its investments in research and development, as is usually the reason for the price of new drugs."

Ultimately, the Food and Drug Administration gets all the thanks for granting KV not only the exclusive rights but the cojones to price gouge expectant mothers reveling in the experience of an at-risk pregnancy. The FDA approval prevents the pharmacies that had been producing the shot from doing so anymore and also prevents doctors from using anything but the KV formulation.

It's always nice to see the government making decisions that are in the best interests of its citizens. And, of course, who would suggest that KV should face any regulation? After all, they're doing the same, we guess.

2. Banks Aid Poor Communities, One Luxury Hotel at a Time

Originally published on Feb. 25 -- Sometimes you have to admire the banking industry's ability to turn lemons into lemonade. Or if it's the case of the Blackstone Hotel in Chicago, the ability of banks to turn billions of taxpayer dollars into luxury accommodations financed with millions in fees.

The Blackstone is a downtown Chicago landmark that fell into disrepair over the years and was in need of a badly overdue facelift for its "beaux arts" decor and "marble staircases," according to an article in Bloomberg Markets.

Luckily, there just happened to be a few billion lying around as part of the New Markets Tax Credits, a program set up by the Clinton administration to spur development and create jobs in communities with high unemployment and neighborhoods in need of "business growth," the Bloomberg article says.

So with a little bit of Wall Street know-how, firms like Prudential Financial ( PRU) and JPMorgan Chase ( JPM) got together to give a hand up to Blackstone guests that typically shell out $699 a night for a room.

Using the New Markets program, which offers firms 39 cents on the dollar for financing new projects, Prudential received $15.6 million in tax credits from the U.S. Treasury Department and JPMorgan got some hefty fees in order to structure the loans and oversee financing for the Blackstone.

Win, win and win.

Of course, some may question the need to use tax credits to rebuild luxury hotels. Sure, the money used for the Blackstone could have translated into a few badly needed clinics in depressed areas of Chicago or as a carrot to attract grocery store chains back to distressed communities.

But the rooms at the Blackstone are spectacular. With a view of Lake Michigan, no less.

A further investigation by Bloomberg reveals that the New Markets program has been used to "build more than 300 upscale projects, including hotels, condominiums, office buildings and a car museum, on streets far from poverty."

Even more disturbing (or ingenious depending on your point of view): Many of the financial firms that have taken advantage of the New Markets program gamed the system to callously portray high-end developments' benefit towards financially depressed communities. As a JPMorgan spokesman said in the article, projects like the Blackstone have helped in-need communities because "it hired more than 200 workers when it opened in 2008."

Of course, it's unlikely that those bellmen, maids and janitors will be able to afford a room at the Blackstone. But we are pretty sure Prudential and JPMorgan executives will be able to swing a few nights.

1. Kenneth Cole Out of Fashion on Twitter

Originally published on Feb. 4 -- Kenneth Cole ( KCP) gave a lesson in how retailers and brands should not use Twitter.

The fashion brand posted this Tweet on Feb 3: "Millions are in an uproar in #Cairo. Rumor is they hear our new spring collection is now available online."

It's this kind of tweet that exemplifies just how powerful 140 characters can be. Unfortunately for Kenneth Cole, it did so in the least favorable way. The post possesses the brand-damaging tone deafness you'd expect when jumping on the bandwagon of trending mob violence in the Middle East in order to draw attention to overpriced shoes and apparel.

It's also the ultimate response to designers who insist that their work isn't just about clothes, that it's a reflection of culture that carries great meaning and importance to society. This tweet is a great reminder that, in fact, fashion is of very little importance. Rarely does it rise to the level of art, and even then, it moves few.

The level of tone deafness was particularly perplexing considering the charitable causes the company aligns itself with, particularly in the fight against AIDS. Here again, one tweet calls all that work into question, making it seem like just another marketing gimmick.

The backlash was, of course, nearly instantaneous. The company quickly apologized for its faux pas: "Re Egypt Tweet: we weren't intending to make light of a serious situation. We understand the sensitivity of this historic moment. - KC"

But it appears the damage has already been done. Here's a note for the fashion crowd: Mob violence is never tres chic.

This article was written by a staff member of TheStreet.

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