Dubai's Dubious Bet
The good folks at Dubai World are desperately seeking an oasis in the Las Vegas desert. Sadly, all they have stumbled upon is a Mirage (MGM) .
Dubai World, a developer, is suing MGM Mirage (Stock Quote: MGM) because it's worried about the viability of the CityCenter complex, an $8.6 billion joint project between the two companies.
(MGM) In a lawsuit filed Monday in Delaware Chancery Court, Dubai World subsidiary Infinity World claims that MGM Mirage's statements about its financial condition put the project at risk. Infinity World is asking the court to award it unspecified damages and relieve it of its obligations under the venture.
Specifically, Dubai World's general counsel, George Dalton, cited concerns about a statement in MGM Mirage's annual report, warning it could default on its loans for CityCenter, widely touted by MGM Mirage as the most expensive private commercial development in U.S. history. The bill for this behemoth could push MGM Mirage, which lost $855 million last year, to seek bankruptcy court protection.
(MGM) Dalton's concerns over MGM's survival are certainly not unfounded. The casino company, currently buckling under the weight of $13.5 billion in debt and a severe downturn in gaming revenue, won a waiver from the terms of some of its debt last week, giving it until May 15 to get its financial house in order.
On Monday, Fitch Ratings downgraded MGM Mirage's Issuer Default Rating to the lowest possible junk rating. Shares of the company's stock have plummeted 95% over the past year to less than $3.
(MGM) While spats between companies are fairly common, this brawl has the makings of two dimwits throwing punches in the air; hence, its inclusion into our Dumbest tally. Maybe they've both spent too much time in the desert because they aren't making any sense.
Just last week, MGM CEO Jim Murren told investors that the relationship between the two companies was "outstanding" when it obviously had imploded. Meanwhile, Dubai World's point man Dalton told reporters that, despite slamming its partner with a very public lawsuit, the company still wants to work with MGM and had "no choice" but to take legal action.
(MGM) It just goes to show you, even in Las Vegas the house does not always win. Especially when it's divided among idiots.
Dumb-o-meter score: 95 -- Dubai World and MGM in Las Vegas? Truly a losing pair.
"The debtors and Barclays wish to resolve any dispute concerning ownership of the gift merchandise," according to the filing in U.S. Bankruptcy Court in Manhattan. A final hearing on the settlement over the trinkets' ownership is scheduled for April 8. Under the agreement, Lehman will repay Barclays $33,880 for warehouse costs.
If Lehman does end up auctioning off its baubles online, we at The Five Dumbest Lab look forward to bidding for one of those engraved wine openers. Nothing could please us more than to raise a glass in honor of the once-proud investment bank-turned-subprime casualty.
Dumb-o-meter score: 85 -- My investment bank went bankrupt and all I got was 682 coffee mugs and 30 teddy bears.
Furniture CEO's Comfy Deal
Scozzafava pocketed the hefty pay package despite sales falling 16.3% at the St. Louis-based company to $1.74 billion in 2008, and a net loss of $415.8 million on continuing operations, a mere eight times its 2007 loss. In December, the company eliminated 1,400 jobs, or about 15% of its remaining U.S. workforce.
In a story about Scozzafava's bonus deal in Wednesday's Wall Street Journal, a company spokesman said "executive compensation decisions are made by an independent committee of the board of directors, which has been advised by global compensation consultant Towers Perrin."
That answer had us scratching our heads a little -- OK, a lot -- so we rang up Furniture Brands International and asked them who hired those fair and impartial consultants. To which they kindly replied, "the board."
Don't blame Scozzafava, though. He just hired the people who overpaid him.
Dumb-o-meter score: 80 -- This furniture company has no legs to stand on when it comes to compensation.
Sex and the CEO
George David used to be the CEO of a multibillion-dollar company. Now he's a Page Six punch line in the New York Post.
The 66-year-old David, who retired as United Technologies' chief executive last year but remained chairman, wants a judge to enforce a 2005 postnuptial agreement he made with ex-wife Marie Douglas-David, 36, to give her $43 million when they divorce.
We at The Five Dumbest Lab sympathize with Douglas-David's plight entirely. It's hard for a girl to live on less than $100 million nowadays. And she grew accustomed to flying across Europe on the United Technologies jet, at shareholder expense of course, so why should she have to go back to flying, yech, first class?
We say, "You go girl!" Somebody needs to teach these silly CEOs a lesson. Better you do it now than risk subjecting some other poor Swedish countess to George and his hapless ilk.
Dumb-o-meter score: 75 -- George David, we hardly knew ya! But we sure do now.
AIG Goes Undercover
In its latest attempt to clear its name, the embattled insurer has decided to change part of it. AIG (Stock Quote: AIG) said this weekend it plans to rename its property casualty business AIU Holdings Ltd. The company looked back to its founding in 1919 in Shanghai for the new but not-so-different moniker: American International Underwriters. Earlier this month, AIG announced plans to spin off about 20% of this particular business in a public stock offering, and could sell off more over time.
The most recent name change was foreshadowed last week when AIG CEO Edward Liddy told a U.S. House of Representatives subcommittee that "the AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it."
And after spending $165 million in bonuses to people who didn't deserve it, we certainly don't believe that the company is trying to save money on the signage. Maybe a better name would be IOU.
Dumb-o-meter score: 90 -- Take note, AIG: Stupidity by any other name is still stupidity.