'Warnaco' Signs
Wachner doing just 'fine'

1. Don't Say We Didn't Warnaco You

Back in 1999,

TheStreet.com

questioned whether Linda Wachner deserved the off-the-charts compensation she was hauling in as CEO of

Warnaco

( WRNC).

Five years later, it's official: She didn't. At least part of it, anyway.

On Tuesday, we learned a few new things about Wachner, thanks to a Securities and Exchange Commission settlement agreement, the findings of which Wachner didn't admit or deny -- and as part of which she's paying a $1.3 million fine. One is, back in 1999, Wachner and other executives at Warnaco -- which manufactured underwear under the brand names Warner's, Olga and Fruit of the Loom -- lied to the public about the reasons behind a $145 million restatement of three years' worth of financial statements.

Two, after the lead outside auditor had the temerity to inform the Warnaco board's audit committee about the inventory problem leading to the restatement -- rather than talk to management first, and even though management had known of the problem for months -- Wachner "expressed dissatisfaction" with the partner's initiative and requested that the partner's employer "address the issue," says the SEC. As a result, the partner's employer, PricewaterhouseCoopers, "replaced the engagement partner and assigned a new audit team," says the SEC.

Three, under terms of Wachner's employment contract with Warnaco, she was eligible to receive a bonus if the company met a certain earnings threshold in a given fiscal year. Because of the above restatement, Warnaco didn't meet the target in fiscal 1998. But Wachner and other executives got bonuses anyway -- one of the fruits of the loom that the hard-charging Wachner enjoyed before Warnaco charged into bankruptcy in 2001.

Back in 1999, when executive compensation know-it-all Graef Crystal issued

a report calling Wachner egregiously overpaid, the company whined that Crystal's report was "misleading and erroneous, and therefore, malicious and slanderous." (Notice the threat of a lawsuit veiled in that "slanderous" pronouncement.)

Wachner spokesman Howard Rubenstein says she's pleased with this week's outcome, according to a spokeswoman for Rubenstein. Ah. Linda Wachner. Pleased to neither admit nor deny guilt, and to pay a $1.3 million fine. Our memory of her taking the moral high ground is all that much more delicious.

2. Doughnut Disturb

Speaking of delicious, we at the Five Dumbest Things Research Lab are getting a little sick of companies blaming their troubles on the Dr. Atkins-inspired low-carb craze, as crazy as we believe the craze is.

Like

Krispy Kreme Doughnuts

(KKD)

, which late last week cited "consumer interest in reduced carbohydrate consumption" as the motivation for lowering guidance -- a move that

took a 29% bite out of Krispy Kreme's stock in a single day.

What we find odd is that Krispy Kreme says the low-carb phenomenon has hit the company hardest in its off-premises sales channels, "in particular sales of packaged doughnuts to grocery store customers."

Krispy Karb?
Doughnut maker creamed

So if the low-carb movement is so big, we wonder, why would its impact hit its different sales channels unevenly?

Arguably, one could say that the actual outlet -- the place where they make 'em and sell 'em hot -- appeals to the doughnut aficionado, the person who just doesn't care about the wisdom of the late Dr. Atkins. Whereas the grocery store doughnuts would be bought by the impulse doughnut buyer, the could-take-it-or-leave-it doughnut eater who's now choosing to leave it.

On the other hand, maybe the disparity is due to the growing realization that an off-premises doughnut, even if it was made by Krispy Kreme a few hours ago, is still just a doughnut.

Either way, our heroes this week are the folks who, given the lemon of the Atkins diet, make lemonade. Like

Colgate-Palmolive's

(CL) - Get Report

Hill's Pet Nutrition division, which recently started selling Prescription Diet Feline m/d, "a low carbohydrate, high protein pet food formula clinically proven to alter a cat's metabolism for effective weight loss."

Yes. An Atkins diet for your cat. A Cat-kins diet, so to speak.

Of course, high-protein diets have been traditional among members of the cat family -- lions and tigers come to mind -- but the audacity of imposing a human weight-loss strategy on a defenseless animal is indeed awesome to behold. We can't wait to hear what

Weight Watchers

(WTW) - Get Report

will be offering in this space.

3. Lord Black, Won't You Buy Me a Mercedes-Benz?

We Americans tend to make fun of Canadians, but they're actually way ahead of us in certain key areas. Their health care system. Their reputable mining stocks. And, as we learned this week, their executive snobbery.

What we're referring to, of course, is the amended complaint filed by newspaper publisher

Hollinger International

( HLR) against former Chairman and CEO Conrad Black, the onetime longtime Canadian citizen now known as Lord Black of Crossharbour.

Hollinger says Black, his wife and other business associates looted the company, accusing them of everything from improperly collecting sham noncompete agreements to refurbishing a 1958 Silver Wraith Rolls Royce limo on the company's dime. ($90,000 worth of dimes, to be precise.)

Lurid stuff, to be sure. But what we love most is the self-justifying email that Black sent to trusted business associates in August 2002, according to Hollinger. Here's what Hollinger says Black had to say about corporate perquisites, specifically the Hollinger-funded usage of a private plane:

"There has not been an occasion for many months when I got on our plane without wondering whether it was really affordable. But I'm not prepared to re-enact the French Revolutionary renunciation of the rights of nobility. We have to find a balance between an unfair taxation on the company and a reasonable treatment of the founder-builders-managers. We are proprietors, after all, beleaguered though we may be."

Is that great or what? If you were to ask an American executive why he took the company plane on a vacation in Bora Bora -- one of the things Hollinger accuses Black of doing -- that American exec probably would feed you some line about setting up just-in-time supply chains in Polynesia or saving valuable time by avoiding commercial flights.

But if you ask Lord Black of Crossharbour why he flies on a company plane, what does he tell you? He tells you that if you don't let him use the plane, you'll start sliding down the slippery slope toward the French Revolution.

Kind of makes you nostalgic for Madame Defarge, doesn't it?

4. Earning It

Speaking of strange goings-on among former CEOs, word limped out this week that the SEC is seeking information from

Steve Madden

(SHOO) - Get Report

related to the shoe purveyor's employment of founder Steve Madden.

The company says it intends to "fully comply" with the SEC.

Steve Madden the person, you may recall, was formerly the CEO of Steve Madden the company. But that was a long time ago. In May 2001, Steve Madden the person took the post of creative and design chief at Steve Madden the company and did something else important, though we can't quite remember what it was.

Oh, now we remember! He pleaded guilty to four counts of securities fraud and money laundering!

Anyway, in September 2002 Madden the guy started serving a 41-month sentence for his crimes. But get this: According to the employment agreement he signed with the company in May 2001, he pulls down his $700,000 base salary while in jail. Or, as the company's recent proxy filing delightfully puts it, "While serving his sentence, Mr. Madden is ... only entitled to receive base salary payments under the agreement."

We love that "only" part. Imagine -- receiving "only" $700,000 a year for going to jail. If we could receive "only" $700,000, we would go, too.

5. The Grasso on the Other Side of the Fence

The

New York Stock Exchange

is planning to remove a commemorative plaque erected by former overpaid chief of the NYSE Dick Grasso,

The New York Times

reported last Friday.

To antiplaque forces at the exchange, the plaque -- signed by then-Chairman and CEO Grasso -- reportedly epitomizes Grasso's self-aggrandizement. To Grasso's supporters, removing the plaque represents not only a revision of history, but also an insult to the trapezoidal-head-shaped Grasso. Which, of course, it is. You don't need to have spent years watching Grasso pose for pictures with dignitaries visiting the exchange -- all in support of the exchange's mission, of course -- to figure out how he'd seethe to see his name taken down.

The Grasso Knoll
Notice the plaque -- uh, we mean lack -- of legibility.

The plaque, which was unveiled on Sept. 11, 2002, memorializes lives lost in the terrorist attacks one year earlier. Or so we are told. See, it's behind the security fence that runs around the exchange, so we can't get close enough to read it.

That gives us an idea of what people should do to solve this particular problem: Nothing. None of the tourists passing by the exchange each day can get near enough to see what the darn thing is. If Grasso's name is actually on that plaque, we figure it's about the size of a gum wrapper. So the NYSE can leave Grasso's name and Grasso's plaque there confident in the knowledge that both will be ignored. That should make everyone happy.

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