5 Dumbest Things on Wall Street: July 10


Goldman's Not So Golden Boy

Sergey Aleynikov's dream was to be a big-shot trader. Turns out he may have traded away a lucrative career at Goldman Sachs for a prison cell.

Aleynikov, who was paid $400,000 a year as a computer programmer for the investment bank, was arrested by the FBI July 3 and charged with "theft of trade secrets." Specifically, the 39-year old Russian immigrant is accused of stealing codes used for Goldman's highly sophisticated, rapid-fire stock and commodities trading and then uploading them to a computer server in Germany. He was released Monday after meeting his $750,000 bail.

Aleynikov told authorities his plan was merely to gather "open source" files on which he had worked, but he "later realized that he had obtained more files than he intended," according to an FBI affidavit filed in the case. Goldman declined to comment, but a Reuters source said the firm was unharmed by the computer breach.

Aleynikov worked at Goldman from May 2007 until June 5. On July 2, he started working at Teza Technologies, a Chicago-based hedge fund focused on high-volume trading. Teza has since suspended him without pay, according to Bloomberg, after learning of the allegations.

We here at The Five Dumbest Lab fully subscribe to the rule of innocent until proven guilty, so we won't officially condemn Aleynikov until a jury weighs in. (Hey! We may be snarky, bordering on obnoxious, but we do have our principles.)

That said, we do operate on a dumb until proven not dumb protocol. And in this case, Aleynikov is undoubtedly guilty on all counts of grand stupidity.

Based on analysts' 2009 earnings forecasts, Goldman is on track to pay out as much as $20 billion this year, or about $700,000 per employee. So Aleynikov was in line for a huge pay day just by sticking around till bonus time. And whether or not his intent was criminal, only an idiot would screw around with Goldman's top-secret trading recipe so close to leaving the firm.

Once the government gains access to the German server, prosecutors will be able to determine if Aleynikov transferred other confidential data. If the feds can prove Aleynikov planned to use the code at his new company, then it's likely his once-golden goose will be cooked.

Dumb-o-meter score: 95 -- Clumsy criminal or unknowing oaf? Either way, Aleynikov was too greedy even for Goldman.

Washington Post Party Pooper

The Washington Post is desperate to conjure up the glory days of Katharine Graham. Sorry to say, the legendary publisher never sold admittance to her legendary parties -- or her paper's integrity -- to the highest bidder.

The Washington Post apologized Sunday for its plan to have corporations and lobbyists pay $25,000 a pop to sponsor private dinner discussions with government officials and the newspaper's journalists. A flier surfaced last week detailing the Post's series of soirees featuring "off-the-record conversations" with reporters and the chance to clink cocktails with Washington insiders.

The program was terminated last Thursday after readers questioned the journalistic integrity of the Post auctioning access to the corporate and political elite -- not to mention the outright tackiness of the idea.

The Post, which is nearly 20% owned by Warren Buffett's Berkshire Hathaway holding company, intended to host 11 so-called "salons," according to the flier, each with one or two deep-pocketed backers footing the bill and, more importantly, having a say about the guest list. The first salon on health care was scheduled for July 21 at the home of Washington Post publisher Katharine Weymouth.

"I want to apologize for a planned new venture that went off track and for any cause we may have given you to doubt our independence and integrity," said Weymouth in a letter that appeared in the newspaper's op-ed section Sunday.

She lamely added that she never signed off on the flier and that it didn't accurately describe the string of cozy get-togethers. As to how the parties were going to be held in her home without her knowledge, we can't quite figure that out. Perhaps they were going to be surprise salons where the guests would hide in the dark and then jump out when an Obama Cabinet member arrived.

The newspaper's executive editor, Marcus Brauchli, backed up Weymouth's version of the events last week, saying that no one in the newsroom had vetted the invitation. An obviously irked Brauchli also proclaimed that "The Washington Post's name is not for sale."

Look, we appreciate the Post's creative attempts to raise revenue, especially after the newspaper division lost $54 million in the first quarter. But both denials still ring hollow, sounding almost Nixonian in nature, especially coming from the once-proud paper that broke Watergate.

And if there is one thing we learned from that sordid affair, it's that you can find yourself mixing with some pretty shady company when you "follow the money" -- even at the glitziest dinner parties.

Dumb-o-meter score: 90 -- Woodward and Bernstein didn't pay Deep Throat 25 grand for tips.

Banks Too Cool For Cali

Californians better keep dreaming if they think America's biggest banks are going to save their financially strapped state simply because Uncle Sam bailed out Wall Street.

Despite accepting multibillion-dollar packages from the federal government during their own meltdowns last fall, some of the nation's biggest banks, including JPMorgan Chase, Bank of America, Wells Fargo and Citigroup, as well as some regional banks, say they won't lend a hand to California lawmakers desperately seeking financial relief.

The banks are playing hardball, pressuring the state's lawmakers to end their budget impasse by threatening to reject IOUs issued by the state. If the banks follow through with their threat, a slew of businesses and families would be unable to exchange their promissory notes for the necessary cash to survive.

California legislators are currently fighting over how to close a $26.3 billion budget deficit. The state has already begun sending out $3.3 billion in IOUs to private contractors, state vendors, people getting tax refunds and local governments for social services.

Over at Bank of America, existing customers can only deposit IOUs and only until Friday. "We don't want acceptance (of IOUs) to deter the state from a budget agreement," bank spokeswoman Julie Westermann told The Associated Press.

In case you've forgotten, or lost count, Bank of America is still on the hook for $45 billion in taxpayer funds. Alas, it seems that beggars can indeed be choosers.

California government officials, worried about their own futures, say the banks should be more sympathetic considering their own plights. Recipients unable to hold their IOUs until the official redemption date of Oct. 2, may be forced to redeem their notes at a discount in the secondary market, a prospect sure to create backlash against both the pols and the banks themselves.

"If they (the banks) hold to that stance, then there's potential for hardship being suffered by the recipients of IOUs," said Tom Dresslar, spokesman in the California treasurer's office.

The federal government has thus far steered clear of California's crisis, wary that any intervention could cause the other 49 states to line up for handouts. But the Obama administration is well aware of the leverage it has over the nation's banks, especially those holding IOUs payable to the U.S. Treasury, and they wont hesitate to use it.

So until these guys pay it back, they may want to pay it forward.

Dumb-o-meter score: 85 -- Governator Arnold Schwarzenegger better solve this crisis soon. Or else it's hasta la vista, baby!

Joey Can't Read

Vice President Joe Biden is certainly no dimwit, but his latest gaffe proves he has a severe case of economic dyslexia. And worst of all for the Democratic Party, he's contagious.

On ABC News' "This Week," Biden confided that the Obama administration "misread how bad the economy was." The veep's honest assessment shocked many Americans who had previously thought Obama's team firmly grasped the situation when they rallied around the president's $787 billion economic stimulus package.

Biden later said it's premature to say whether the country will need a second stimulus package. Then again, Biden's remarks are open to interpretation, especially by his boss, President Obama, who tried to clear things up by telling NBC News that "rather than say misread, we had incomplete information."

In order to make it crystal clear that the man and the man who is a heartbeat away are on the same page, Obama then told ABC News: "There's nothing that we would have done differently." As to the prospect of a second stimulus, Obama switched to FOX News to say that he won't "take anything off the table when unemployment is close to 10% and a lot of Americans are hurting out there."

Wow! Obama goes on three networks to explain away his veep's remarks. Now that's what we call teamwork at the top of the ticket.

Unfortunately for them, the rest of the Democratic Party is also having difficulty getting it together.

House Majority Leader Harry Reid (D., Nev.) told reporters this week, "As far as I'm concerned, there is no showing to me that another stimulus is needed."

On the other hand, Berkshire Hathaway's Warren Buffett, a supporter of Obama during last year's election campaign, said this week that a second economic stimulus package "may well be called for."

Meanwhile, nobody is enjoying the Democratic dysfunction more than Republican leaders, especially House Minority Leader John Boehner (R., Ohio).

"I found it ... interesting over the last couple of days to hear Vice President Biden and the president mention the fact that they didn't realize how difficult an economic circumstance we were in," said Boehner.

Senate Minority Leader Mitch McConnell (R., Ky) opposed the first stimulus bill and ridiculed the idea of a second one.

"Down home, we used to say there's no education in the second kick of a mule," said McConnell.

No way anybody can misread that.

Dumb-o-meter score: 80 -- Forget Sarah Palin. Joe Biden is the GOP's best hope for 2012.

Las Vegas Sands of Time

Las Vegas Sands Chairman Sheldon Adelson says he lacks the equipment to complete his Singapore casino on schedule. No, what he's really missing is gamblers.

Adelson said Wednesday the that opening of the company's $5.5 billion Marina Bay Sands casino and resort in Singapore will be delayed until early next year because of problems sourcing construction materials. Adelson said he expects the casino to open in January or February instead of December as the company predicted earlier this year.

"We can't control the flow of sand to make concrete, the availability of steel or the availability of labor," Adelson told a news conference at the site in Singapore.

Oh sure, Shel, we know exactly what you're going through. It must be tough finding sand and steel in this brutally tight construction market, especially with all those massive building projects breaking ground all across the world. And as for finding workers to complete your South Seas gambling paradise, where on earth will you find them with unemployment at record lows?

Ah, sweet, sweet sarcasm. What would The Five Dumbest Lab do without you?

Seriously, if Adelson were really suffering from a labor shortage, he should just fly over some of the 200 employees he let go last week from the company's Venetian and Palazzo casinos in Las Vegas to help out, or perhaps some of the 11,000 workers who were laid off when Las Vegas Sands shut down its Macau hotel last November.

And speaking of Macau, why not airlift building materials from that multibillion dollar project you mothballed last year if the need to finish Singapore is so essential? (Las Vegas Sands is considering an IPO for its operations in Macau).

The Marina Bay Sands was one of the few projects Adelson continued to work on after the company's liquidity dried up last year. And while shares of the company have risen from the ashes since March, they are still down more than 80% since last year because tourists are still staying home.

If Adelson's survival strategy is to go all-in on his Singapore hotel, then he should quit bluffing already and just get the thing built.

Dumb-o-meter score: 75 -- We see your hand, Shel. And it's not very good.

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