Wednesday, May 16, 2007

Farewell to a Corporate Blame-Shifter

One of the great blame-shifters of the corporate world is gliding off into the sunset. His name is Eugene Melnyk, and he runs a dodgy little Canadian drug company called Biovail. Melnyk will be packing up his things and retiring as CEO as of June 30, the AP reports.

Isn't that terrible? I was so getting used to reading about this company's most famous products: the junk lawsuits that it files to suppress negative information in the marketplace.

The first, which it filed against a short-seller back in the 1990s, went nowhere and was dropped.

The latest was filed in February 2006 (here's a company handout announcing the glorious thing) and was filed against villainous hedge funds and independent analysts. You know -- the guys who have the audacity to think that Biovail is a piece of cow dung? The famous train wreck filed a similar suit several months earlier.

The second lawsuit got him a certain amount of sympathetic attention from the media, including a spectacularly naive 60 Minutes segment. That report was so awful that it didn't even mention his 1990s lawsuit, which was filed against a shorts-seller and was similar to the second suit he filed.

Either Biovail is a victim, as Melnyk has asserted, or a piece of cow dung, as the analysts and short-sellers allege. Which is right? Well, "dung" seems to be winning, hands down.

The SEC the other day filed a Wells Notice, which means that it is about to file charges against the company and Melnyk personally. The U.S. Attorney's office in Brooklyn is also investigating. Joe Nocera had an update in his Saturday New York Times column (the one that sent Patrick Byrne bouncing off the walls last weekend).

Hence the entirely coincidental retirement.

As you can see from Joe's column, junk litigation works. It got Banc of America Securities to drop its analyst coverage of Biovail. Thus the company was able to achieve its aims by simply filing the lawsuit and not proving a thing.

Isn't that terrific? After Enron, tough analyst coverage was supposed to be the aim of all red-blooded Americans. But now we know how that was all just a lot of bull. Analysts are supposed to write glorified press releases, showering praise on inept CEOs like Melnyk and Byrne.

So bon voyage, Eugene Melnyk! You'll be missed. But there are plenty of incompetent CEOs following in your footsteps. Blame-shifting has been all the rage for some time, and the SEC is only just catching up.

P.S. I wonder if 60 Minutes is going to do a follow-up if and when the SEC files charges?

© 2007 Gary Weiss. All rights reserved.


Wall Street Versus America was published by Penguin USA on April 6.
Click here for its listing and here for more information on the book, from my web site,

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