Geithner's Financial Stability Plan, Or Whatever

C’mon now, everyone. Cheer up. At least Tim Geithner is easier on the eyes than Hank Paulson, whose face seemed to have the words “we’re all gonna die” written on it no matter what he was saying.

Yesterday's stock market plunge, everyone says, was about the plan’s vagueness and skimpiness and not its content. As we’ve all heard a gazillion times, the markets yearn for certainty, which the administration cluelessly dangled but didn’t deliver. Still, I wish the markets would just grow up and accept the fact that certainty, which seems to have been an illusion anyway, has packed up and moved to an undisclosed location. Somewhere in outer Brooklyn, is what I’m hearing.

There are things to like in this "not-yet-a-plan" Financial Stability Plan. While the bad bank idea presents huge practical issues – the difficulty of pricing crappy assets tops the list – I’m inclined to support it because Trillion-Dollar Meltdown author Charles Morris said something nice about it in an interview back in October. I've heard this guy speak, and if there's such a thing as a wise man, he's it. (Another thing Morris said in that interview, by the way, was this: "In the real world, this is going to be a total mess no matter how it's done. Government is a very blunt instrument.")

Also, I think Geithner genuinely understands that the government's actions need to be a lot more consistent and predictable. Under Paulson, the TARP bore an uncanny resemblance to me driving a stick shift: lurching, stalling, grinding the gears and generally frightening everyone else off the road. Transparency is crucial, too; it's encouraging that, as BailoutSleuth noted today, Geithner has begun to publish reasons why Bank X, Y or Z got TARP money.

A less encouraging thing is that a click on the webcast link posted on the new Financial Stability website brings up not Geithner’s speech, but a video of some Hank Paulson press conference from last December. Well, maybe we’re all gonna die after all.

Image source: forums.tannerworld.com

Positively Wall Street

As secrets go, "The Secret" seems rather heavily advertised. In case you’ve somehow missed the DVDs, books and "scrolls," here's the gist: Just radiate positivity and you'll attract good fortune the way an open Coke can at a picnic attracts bees.

Some corporate PR people seem to believe in The Secret -- or, as we call it here at Proxyland, The Power of Positive Press Releasing. But, as Floyd Norris pointed out in his NYT column last week, too much positivity can become a negative.

Norris says Lehman’s public statements about its capital situation turned out, over and over, to be way too cheery. He believes this created distrust, scared off possible saviors and left the firm isolated at its ultimate moment of crisis. (Of course, methods for valuing illiquid paper being touchy-feely, Lehman may have genuinely convinced itself its positions weren't really doing so badly.)

These observations prompted me to wonder where WaMu ranks on the positivity index these days.

Well, it sounded pretty perky in its Friday press release, entitled "Update on Expectations for Third Quarter Performance." (At least these guys were nice enough to give us an update; Lehman, by contrast, clammed up between its 10-Q filing on July 10 and its "don't worry, we're restructuring" press release on September 10.) But WaMu did include a warning not found in its earlier releases:

The company expects market conditions to remain volatile during September and therefore the actual third quarter results could differ materially from the third quarter earnings outlook provided above.

Although this looks like the “forward-looking statements” crap everyone sticks in their earnings releases, WaMu's warning is more pointed. It rubs our noses in the uncertainties of this particular quarter, or what you might call “the fierce urgency of now.”

Lehman, writes Norris, was the opposite of the boy who cried wolf. It's left us with a new bedtime story: The Boy Who Held Conference Calls and Said Rumors of a Wolf Were Overblown. The ending, as in many morality tales, is rather gruesome.
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Explanatory note/excuse: I drafted this post early Sunday, so it doesn't mention certain newsworthy developments of this morning. On that score, let's just say I'm rethinking my vote in Friday's "what scares you most" poll, especially since Fashion Week is actually over.

Longing for Pottersville

Remember that Voldemort fellow? Total loser. Through seven long books, he couldn’t figure out how to kill a nearsighted, risk-loving schoolboy who barely knew his expelliarmus from his levicorpus.

In fairness to the evil one, Harry Potter is hard to kill. The final book of the series, Harry Potter and the Deathly Hallows, came out in the summer of 2007, but the boy is such a force of nature that he keeps showing up in SEC filings – nearly 100 filings already this year.

For example, two bookstore chains just reported significant year-over-year drops in store sales and placed the blame largely on Harry’s disapparation. (That’s a J.K. Rowling, word, OK? Don’t get all English teacher on my ass.)

At Books-a-Million (BAMM), sales dropped a nasty 10.4% over the same quarter in 2007; the company's 10-Q (filed yesterday) states that this was “primarily due to sales of Harry Potter and the Deathly Hallows in the prior year as well as difficult macro-economic conditions and a quiet media cycle in the current year.”

The Borders Group (BGP), in a 10-Q filed last Friday, said store sales were down by 8.9% for the quarter, but hey, really only 5.1% when adjusted for the Harry factor. The post-Harry effect was even more pronounced at the firm’s struggling Waldenbooks subsidiary, with a 7% sales drop that would have been only 1.4% if the kid hadn’t gone and inflated their bloody figures last year.

In the book business, Harry has been the black swan, the 100-year flood, the magical Mega Millions jackpot. If there's ever an eighth volume, it should be called Harry Potter and the Deathly Blow to the Following Year's Sales Figures.

It's Just a Phase

After years of yakking, policy wonks still haven't answered this question: What the Heck Are We Going to Do With All These Baby Boomers? This issue has a bunch of workplace subtopics, including: (1) How Are We Going To Get Them To Leave Once And For All So We Can Have Their Aeron Chairs? (2) OMG, Who’s Going To Do All This Work When They’ve Gone? and (3) Hey, When Can We Get Rid of This Stupid Rule The Old People Have Against Flip-Flops in the Office Cuz That's, Like, Really Stupid?

The solution to these pressing questions, some people think, is to offer “phased retirement,” gradually reducing boomers’ hours and responsibilities as they train their successors. Sensible as this sounds, it doesn’t usually work (despite some legislative fixes), because few people can afford to phase out before their pensions fully phase in, and if they cut back their hours, their medical benefits may retire and move to Fort Lauderdale.

In Proxyland, however, phased retirement is not merely a wistful dream, but a thriving institution, though it goes by a different name -- the “post-retirement consulting arrangement.” These cushy deals for outgoing bigshots come in many varieties, and may take the form of pretend jobs or involve titles like non-executive officer or Chairman Emeritus.

But at least one company has realized that "phased retirement" has a nice ring. Taking a bold semantic step, Schlumberger (SLB) states in its proxy that it follows this practice for its executive officers. Last year, for example, it signed this contract with former CFO Jean-Marc Perraud, "phasing" him down to "senior financial advisor." Through 2010, Mr. Perraud will be working no more than half-time (and quite possibly less) at a salary of $450K, plus benefits. If all boomers could phase out like that, we wouldn’t need no freaking policy wonks, thank you.

But I don’t really want to pick on Schlumberger, a company that doesn’t use employment contracts, golden parachutes or change of control agreements, and sometimes assigns its executives high-minded performance objectives involving stuff like safety, diversity, and social responsibility. Plus which, given that its arch-rival in the oilfield services business is an outfit named Halliburton, it's going to look squeaky clean no matter what I say.

Over There

Here at Proxyland I leave heavy number-crunching to the experts. Which is good, because some numbers in the 4th quarter 6-K that UBS (UBS) filed yesterday are painful to look at, including this one: $13.7 billion in mortgage-related write-offs.

So I'm just skimming through the company’s narrative, which turns out to contain some intriguing words and phrases, e.g.:

"Monoline exposures" - In happier times, the word “monoline” could have had a nice career as a brand name for a 1950s vacuum cleaner, or some such thing. Sadly, however, it refers to monoline insurers, so called because they insure a single industry. Here, the industry we’re talking about is securitization (if you can call that an industry), and the monolines are poor unfortunate bond insurers like FGIC and Ambac.

The phrase “monoline exposures” ought to be oxymoronic. These are insurers. They’re not supposed to be exposing your ass; they’re supposed to be covering it, right? Yet here comes UBS with a nifty chart of its monoline exposures, which add up to (holy cow) $3.6 billion.

The word “monoline,” of course, never appeared in any UBS filing until yesterday.

“Devastating" - This one jumped out at me from the letter to shareholders signed by Chairman Marcel Ospel and CEO Marcel Rohner, who sheepishly admitted there had been a “devastating development in our Investment Bank’s US residential mortgage business.”

Being European, Messrs. Ospel and Rohner may not realize we Americans aren’t used to hearing corporations use words like "devastating" when delivering bad news. Les Deux Marcels really should be more culturally sensitive to our delicate ears. What, do they not know about headwinds over there in Switzerland? I believe they do know something about cows, so if UBS looks down it may find a softer word for what it has stepped in.

No!

As I watch Microsoft (MSFT) and Yahoo! (YHOO) go at it, I’m beginning to think the exclamation point could be an effective anti-takeover device. In Microsoft's press release today relaying the bad news about Yahoo!'s rejection of its overtures, the would-be acquirer was forced to append that incongruously cheery symbol to its adversary's name over and over. (Yahoo! Yahoo! Yahoo! Yippee!) Rather humiliating, really, and it also made Microsoft's own name seem extra-bland, just like PC Guy from those TV commercials.

If I were Microsoft this would drive me crazy, and I’d probably give up on Yahoo! and seek consolation by heading off to the nearest Taco Bell to choke down a Gordita Supreme, only to realize Taco Bell is owned by Yum! Brands (YUM), at which point life would simply seem too cruel.

The dreaded exclamation point also screwed up today’s New York Post headline, which without it would have been “Yahoo Hoo-ha,” with the company’s name as an adjective, but came out “Yahoo! Hoo-ha,” which is really a different thing altogether.

Gone With the Wind

My patience reached a breaking point with yesterday’s news that “headwinds” have helped 4th-quarter profits at Yahoo! (YHOO) drop by 23%.

I've been tracking the Headwinds Cliché Index for the past few months, after tripping over the H word again and again on my regular strolls through Proxyland. A search for “headwinds” in SEC filings this month yielded 161 hits, nearly triple the number of times it appeared in January of 2007.

Not being a CEO, I don't know whether "headwinds" refers to boating or to flying and frankly, my dear, I don’t give a damn which one it is. Whatever its origin, this overblown metaphor seems to serve as an all-purpose excuse for pretty much anything that’s going wrong anywhere, financially speaking. The filings speak of “macroeconomic headwinds,” “credit headwinds,” “market headwinds,” and even “delinquency headwinds.” Fund managers seem especially fond of the word, often bragging about how they've "prevailed" in the face of these fierce countercurrents.

I’m not saying there’s anything wrong with a company using this word to capture the state of economic pushback that looks to be the real state of our union right now. I am saying, however, that I’m sick to death of it. Come on, people, there are 10,000 writers on strike - grab a few, buy them some beers and see if they can't come up with something better. Failing that, crack open a thesaurus and get your maelstrom on.

Late-breaking News

We wish there were an award for Least Informative Disclosure About a Government Investigation, because then we could nominate Manpower Inc. (MAN).

Three years ago, Manpower announced that French authorities had begun an investigation into possible violations of French and EU competition laws. According to a December 2004 press release, an official of this French agency showed up at the company’s Paris office wielding a search warrant and looking for “evidence of price fixing and allocation of market share within the French market.” Since then, the company has mentioned the investigation in its 2005 and 2006 10-Ks, but hasn't provided any new details.

Last week we finally got an update on the situation. In a terse 8-K filed Friday, Manpower said French authorities have now issued something called a “Statement of Objections.” So what does this mean? It is, the 8-K helpfully informs us, “a further step in the proceedings.” Oh, OK, thanks.

It’s not Manpower’s fault, we must assume, that the investigation is taking so long. Given the 35-hour workweek and long summer vacations that are de rigueur in France, it could be years before we get another update.

Decisions, Decisions

The world of PR lives by its own happy rules. Take the press release Merrill Lynch (MER) put out yesterday to announce Stan O’Neal’s official parting. It said (with what would be a straight face, if press releases had faces) that the esteemed Chairman and CEO had “decided to retire.”

In some legal hair-splitting way, this might be a true statement. Once O’Neal and the board high-fived on calling his embarrassing ouster a retirement (both for public consumption and under the firm’s compensation and benefit plans), he sensibly chose to take that route.

But whether Mr. O'Neal negotiated for the "decided to retire" language or it sprang from the head of some PR genius, the wording suffers from trying too hard. Did Merrill think none of us were watching last week as the board dragged O’Neal toward the exit door like bouncers evicting a drunk? Maybe they assumed we were all fixated on the imminent release of Saw IV.

It's telling that in the 8-K filing (to which the company attached O'Neal's severance agreement), Merrill spoke more carefully, sparing us the “decided” part and stating simply that Mr. O’Neal “has retired.”

Of course, we all know that in Proxyland people rarely get fired. Every day, however, CEOs are seized by sudden urges to retire long before retirement age, or wild impulses to run off and “pursue other interests." Maybe some PR people should follow their example.

Mean Muggles

Even if you didn’t love the Harry Potter series, it was sad to see it end. I’m sure they got really weepy at Scholastic Corporation (SCHL), publisher of the magical epic. In its first-quarter earnings release a couple of weeks ago, the company - in language worthy of Harry and his adolescent friends - termed sales of Harry Potter and the Deathly Hallows “phenomenal.”

And indeed, proceeds from the book were totally awesome, bumping Scholastic’s quarterly revenues up 75% over the prior year. Unfortunately, the company didn’t know the spell for converting all that cash into profits and reported a loss of 7 cents per share. (Their excuse was that they normally lose money in the first quarter because schools are out and they can’t sell books to unsuspecting third-graders through those fake school "book clubs." Personally I think this is kind of a dorky business model, though as a blogger I probably should not be using the term “business model.”)

Late in the summer, while everyone was plowing through Deathly Hallows, Scholastic was hit with a class action suit alleging securities fraud. The plaintiffs’ lawyers (a group less popular than Dementors in many quarters) sent out a press release to brag about it, but Scholastic just disclosed the lawsuit this week in its first-quarter 10-Q.

The 10-Q says Scholastic hasn’t yet responded to the complaint. It remains to be seen whether this is just another ho-hum strike suit. The gripe is that between March 2005 and March 2006, Scholastic gave an overly rosy impression of its prospects while failing to write down certain assets and reserve enough for bad debts, among other alleged screw-ups, and that Scholastic insiders traded on info they kept from the public. The lead plaintiff is an institutional investor, though hardly a household name: the Alaska Laborers Employees Retirement System. The complaint adds as defendants Scholastic's eternal Chairman/CEO/President Richard Robinson (son of the company’s founder) and former CFO Mary Winston, who left in July of this year with $1.2M in severance payments.

I hope Scholastic is busy hiring defense lawyers, or practicing Defense Against the Dark Arts. Or maybe there's no difference.

Cowed

In Proxyland’s heyday, shareholders trustingly approved whatever compensation plans the folks in charge said they needed. What were we supposed to do, read the plan descriptions or – ha! – the plans? Instead, we quickly agreed to give the CEO anything he wanted so we could throw out his proxy statement and move on to the next item in our mail pile, that magazine with Lindsay Lohan on the cover.

Times have changed. Look at poor Dean Foods Company (DF), the country’s largest milk producer. In its recent proxy, Dean asked shareholders to bless a new equity incentive plan because its old stock plans were running dry.

A pretty ho-hum request, normally, though perhaps the total comp disclosed for Chairman/CEO Gregg Engles ($11 or 12 million, depending how you count it) bugged some people, or maybe it was the $250,000 he spent frolicking on the company's private planes. (All right, the “frolicking” part could be unfair; for all we know he passed the time eating milk and cookies and studying the sales numbers for soy milk. Or maybe even drinking soy milk, in which case we totally take it back.)

Anyway, the vote count must be looking dismal because yesterday the company filed additional proxy materials containing a glossy plea to shareholders to say yes to the equity plan. Pretty please, guys? With organic milk on top?

The world as we knew it is gone. Now companies butter up ornery shareholders while the rest of us muster the courage to go to the store and choose among organic 2%, antibiotic-free lactose-free skim, or enriched vanilla rice milk. Thank you, Lindsay, for snorting cocaine on videotape. You, at least, never change.

Play Money

We try not to joke about people’s names here. It’s childish, plus we have a slight glass house problem. But we’re making an exception for the members of the Compensation Committee at The Gymboree Corporation (GYMB), maker of cute stuff for toddlers. This fearsome trio is known as Heil, Pound and Rambo.

Tough as they sound, these guys seem quite soft-hearted when it comes to bonuses. For one thing, the CD&A in last week's Gymboree proxy leaves the distinct impression that they interpret the words "bonus plan" rather loosely.

Storytime, children:

Once upon a time there was a very nice company called The Gymboree Corporation. In February 2006, the company put in place a brand-new 2006 Bonus Plan for full-time employees. The Compensation Committee earnestly studied the CEO’s business plan, set detailed earnings goals and promised to pay bonuses ranging from 25% to 150% of target amounts, depending on how things panned out in Gymboreeland.

As it happened, the company made lots of money through the first three quarters of 2006 and everyone was very very happy. So happy, in fact, that in October the Committee suddenly invented a brand new extra-fun bonus plan, the 2006 Fourth Quarter Bonus Plan, just “to provide further incentive” for four very special friends – the CEO and three other executive officers. When the year ended, everyone had earned bonuses under the orginal plan at the highest (150%) level. This came to $967,500 for Chairman/CEO Matthew K. McCauley, who then got another $322,500 under the Fourth Quarter Plan, bringing his total bonus to nearly $1.3 million. (Not to mention stock grants valued at nearly $4 million, but that's another story.)

Then the Committee got even happier, so they said that while “we believe that our executives should generally earn bonuses under incentive plans with specific performance goals, such as the 2006 Bonus Plan and the 2006 Fourth Quarter Bonus Plan… we awarded discretionary cash bonuses in several situations.” And so some senior managers, including one named officer, got even more bonus money. Hooray!

OK, the cash paid here was modest by Proxyland standards and the company is performing well. Still, if you adopt a bonus plan loaded with all sorts of fancy-sounding formulas supposedly sufficient to "incentivize" everyone, then later find excuses to toss out money over and above the plan just because you feel like it, it begins to sound less like a plan and more like some impulsive 3-year-olds banging on a toy cash register. And boy, can that get on your nerves.

When Worlds Don't Collide

We've observed before that Proxyland is a place of paradox. Today we report that in this magical locale it is possible simultaneously to retire, be employed, and get a raise, even if you don't know exactly when all of this will happen. Except for the raise, which already took effect.

On Friday, Compuware Corporation (CPWR) filed an 8-K along with a short document called a "Post-Retirement Consulting Agreement." Apparently Chairman and CEO Peter Karmanos, Jr., on some date that hasn’t happened yet and upon which he and the company will harmoniously agree, will “retire.” In the meantime his salary, set at an even 1 million last June, just went up by $50,000.

Upon “retirement" he’ll transform into “an employee in a consulting role.” The contract specifies no job title, required hours or duties, but for four years Mr. Karmanos will continue to receive annual bonuses (unquantifiable right now) and retain all his medical and insurance benefits - even his vision plan - plus an office, secretarial help, and a car. His stock options won't expire. He'll also receive a year’s salary - pegged to whatever he’s being paid at “retirement” - stretched over the four years of “employment.” (The salary figure, oddly, has a floor of 1.2 million, more than he’s making now.)

If the company decides it no longer needs his “consulting” services, he’ll still get the salary and benefits for the entire four years and all his stock options will vest as he heads out the door.

So is this a new job or merely a cushy severance arrangement? It depends on how Mr. Karmanos spends the time, I guess. He can put on a suit, get in his company car and head to his office each morning to glare at his secretary over the rims of his company-paid eyeglasses. Or he can head to the links to relish his retirement, knowing if a ball whacks him in the head and he ends up in the emergency room, his “employer” has him covered.

Rebound

Shame on you, Michael Dell. It’s not nice to break up someone else's relationship on Valentine's Day.

Poor Solectron Corporation (SLR) announced yesterday that its CEO of four years, Michael Cannon, was dumping it to move in with Mr. Dell and play a role in his movie sequel: “CEO II: Eliminating Redundancies.”

Last week Mr. Dell painted himself as a DIY guy, bravely declaring to his employees (oops) and the press that he wasn't looking to hire a Chief Operating Officer. Mr. Cannon’s new job, however, bears the title of President, Global Operations. And we're told that all of Dell’s “manufacturing, procurement and supply chain activities” on every continent, possibly excluding Antarctica, will report to him.

I'm not in the fog of young love like Mr. Dell and Mr. Cannon, but nevertheless I'm confused.

Surprise Packages

They never call, they never write: Still no word from our friends at Omnicare (OCR) about their deal with former COO Glen Laschober, who left on the 19th of January and, as we speculated at the time, either was or wasn’t fired.

The FDA loves writing letters, though, and it turns out that on January 11 - a week before Mr. Laschober’s last trip through the Omnicare cafeteria line - it sent one to the company to complain about sloppy drug packaging. The letter used harsh language like “serious deviations,” “cross-contamination” and “adulterated” and cited several instances of “mix-ups,” a technical term referring to the appearance of bits of Drug A in bottles of Drug B and pills of different dosages all showing up in the same container.

Perhaps Omnicare should approach Northwestern Mutual to obtain the rights to that "Quiet Company" slogan, having stayed mum about all this until the FDA posted the letter on its website yesterday. At that point, the company noted that the FDA's warning "does not raise new issues." Actually, since the agency has been complaining about some of these packaging errors since 1996, that was kind of their point, dude.

Omnicare, please get in touch with us soon; we’re worried about you. And don’t use your problems as an excuse to self-medicate. You never know what might be in that bottle.

Catty

In quantum mechanics there’s a famous thought experiment known as "Schrodinger’s Cat Paradox," in which somehow a cat in a box is dead and alive simultaneously (don’t ask) until someone opens the box to check it out.

Here at Proxyland we are unfazed by paradox. Last Friday Omnicare, Inc. (OCR) and its EVP/Chief Operating Officer Glen Laschober parted ways, well before the expiration of the 2-year contract signed on his arrival in August 2005. According to press reports, he was "terminated by mutual agreement." Meaning, I guess, that he was fired, and also somehow not fired.

Things hadn’t been going well at Omnicare since Mr. Laschober showed up. Its net earnings fell more than a third in the first nine months of 2006, maybe because of a plant shutdown, a slump in the company's nursing home business and six different drug recalls caused by mislabeling.

Until we receive word on the nature of Mr. Laschober’s severance package, he shall remain nicely suspended in his fired/unfired state. Officially, of course, he pranced off joyfully "to pursue other interests" (which I’m hoping do not in any way involve dead cats). So logically he ought to be leaving under the "resignation without good reason" clause of his contract, which would render him unfired but severance-less.

I just have a funny feeling, though, that when the box is opened and the 8-K filed, we will find Mr. Laschober to have been fired ("terminated without cause"), yielding him a cash payment of twice his base salary (which was set at $360,000 on his arrival but could be higher now) and twice his 2006 bonus, whatever that was. Also, Omnicare still owes him restricted stock to make up for stock options granted by his former employer, CVS, that would have vested in 2007 and 2008. (He's already received "make-up" equity for his 2006 CVS options.) This may or may not amount to much; he wasn’t enough of a fat cat at CVS to make it into the proxy there, so we don't know the exercise price.

I look forward to the swift resolution of Laschober’s Paradox. Meanwhile we can puzzle over a new scientific paradox, the one in which American Idol's Paula Abdul is drunk and not drunk at the same time.

TIVO Time

Like most writers, I struggle with writer’s block. Right now, for example, my brain feels like a pint of Haagen-Dazs mint chip ice cream just removed from an expensive Subzero freezer. Eventually the stuff melts enough to let me scoop some out, but in the meantime there sits my slice of pie, naked and reproachful. As does my computer screen.

I envy the prolific writers at Microtune, Inc. (TUNE). In their last 10-K, the risk factors disclosure alone took up 18 pages. Understandable, perhaps, for a company that has enjoyed NASDAQ delisting, shareholder lawsuits, and a stock performance that looks like this.

On the last business day of the old year, Microtune unveiled the results of an internal investigation of its past stock option habits. The press release is so long and the story so packed with sordid details they ought to pitch it as an HBO mini-series.

In addition to the humdrum backdating practices followed at other firms - dating option grants weeks or months before the real grant dates - Microtune “regranted” a whole bunch of existing options at lower prices, pretended employees were hired and had options bestowed on them before they actually started working, let people play with exercise dates, gave former employees extra time to exercise options by keeping them on the payroll after they’d departed (recordkeeping a la Tony Soprano), changed performance goals after the fact, and fudged numbers in getting board approval.

Happily, the investigation concluded there was "no intentional wrongdoing" by anyone who’s now working there or serving on the board. It must be nice to have such a sunny view of human nature; the worst offenses seem to have pre-dated the arrival of the current CEO, James Fontaine, but many of Microtune’s directors were around for the earlier seasons of this drama. So when HBO options the show, you'll find me transfixed before my TV, eating pie a la mode.

Purple Haze

I’m beginning to wonder what’s going on at your average pharmaceutical company. What kind of drugs are they testing, exactly? Last week we scratched our heads over one Mr. Mucus, proud mascot of a snot-remedy manufacturer. And now, courtesy of Inspire Pharmaceuticals, Inc. (ISPH), the "Eye-Drop Cowboy" comes sauntering into the corral. (Sorry, I don’t know his real name, so I gave him one. I could have been a lot meaner, too, since he has no legs and is dressed entirely in purple.)

Inspire got some bad news recently. The SEC, which has been snooping around since way back in August 2005, just got serious. Apparently they have a beef with the way the company disclosed clinical trial results for a dry eye treatment. In late October they gave "Wells Notices" to the company, CEO Christy Shaffer and Executive VP Mary Bennett. A Wells Notice is the SEC’s way of showing they care about you, so much that the staff wants to start an enforcement action against you and is giving you one last chance to talk them out of it.

A Wells Notice is designed to explain the substance of the government’s charges. Yet in its just-filed third quarter 10-Q, Inspire still seems bewildered. Using a turn of phrase it employed back in September 2005 when the investigation was newly hatched, it refers to the SEC's doings as "a formal, nonpublic investigation which we believe relates to our Phase 3 clinical trial of our dry eye product candidate."

You believe? You’ve been under investigation for over a year, received a bunch of Wells Notices, and you still don’t know why?

My dears, the Eye-Drop Cowboy may be dreamy, but he can’t save you now. Please get A LAWYER. Soon.

A Recount

As you may or may not have noticed, today is Election Day. Yesterday, Diebold Incorporated (DBD) bragged in the notes to its third quarter 10-Q that it's finally fixed some problems at its famed voting machine subsidiary, Diebold Election Systems, Inc. - or DESI, as they call it. No, not those problems.

Diebold was referring to a flaw in its internal controls that, as noted in last year’s annual report, caused it to botch - materially - the reporting of DESI’s revenues. The company's excuse, repeated yesterday, was that it "did not have personnel with sufficient technical knowledge to analyze complex revenue contracts to ensure that such transactions were accounted for in accordance with generally accepted accounting principles."

I consider myself a connoisseur of apologies and excuses, but this one confuses my palate. What they're saying is: "We didn’t know what we were doing and we didn’t bother to hire anyone who did." On the one hand, this is utterly lame and contains not a shred of legitimate justification. On the other hand, it's disarmingly honest and I find myself beguiled by its offbeat charm.

Sadly, when the next Presidential contest rolls around we may not have Diebold to kick around anymore. As Fortune Magazine reported last week, the firm may soon declare defeat at the polls and exit the voting biz. So before it's too late, check out the inspiringly patriotic ad on the DESI page of the Diebold website, which has it all: flags, Mount Rushmore, New York City firefighters, multiethnic children. Too bad they had to ruin the good mood with a picture of the Capitol dome.

Stringy Stuff

I understand the science of marketing about as well as I understand string theory, which - despite wading through two popular books that swore to make it a breeze for us regular folks - I understand not at all, especially the part about the ten dimensions.

So if anyone cares to explain to me why Adams Respiratory Therapeutics, Inc. (ARXT) chose to display on the cover of a recent presentation what appears to be a frog wearing a wifebeater that says "Mucus Rules," I’m eager to learn. I’m thinking maybe it’s a marketing technique that makes perfect sense in the seventh or eighth dimension.

Since I desperately needed an excuse to link to that picture, I was thrilled to find something to post about in the company’s proxy statement filed on Friday afternoon. Two senior officers – John Thievon, Executive VP for Sales and Business Development, and David Becker, Chief Financial and Administrative Officer and Treasurer - have been making like nomads recently. Just last year they relocated from the firm's manufacturing center in Fort Worth, Texas to its headquarters in Chester, New Jersey, with the company picking up moving expenses of $53,771 for Thievon and $146,914 for Becker. But this year both execs turned around and headed right back to Fort Worth, at a cost to shareholders of $168,782 (Thievon) and $75,520 (Becker). Apparently it took the boys only one New Jersey winter to realize that “Mucus Rules” is more than just a clever marketing slogan.

Correction: He is not a frog. His name is Mr. Mucus, and here he is with the missus.