The Economy

Good Week/Bad Week: Whey Station Closed

Suprema CEO, CFO said to have committed the cheese crime of the century; accused of skimming, milking investors, other bad puns. Plus: Liz Phair ec...
John GoffJuly 15, 2005

Disclaimer: Good Week/Bad Week is presented by the authority of the Ponds Institute and The Sheboygan FOE. Funding for Good Week/Bad Week is provided by the Society for Relentless Esoterica and the not-for-profit Dyslexics of the Universe Untie! While items in this column are based on real news events, most everything else is made of gossamer wings. Unless otherwise indicated, quotes have not been verified, corroborated, or even spell-checked, and generally contain obscure references to black-and-white TV shows and minor Greek poets. Public figures in this column tend to come off looking bad, and should refrain from engaging legal counsel to be made whole again. It can’t be done.

When reading this column, bear in mind that the author has an axe to grind and a pea-shooter for a brain. Good Week/Bad Week is counter-indicated for thinkers, dues-paying members of Mensa, and anybody else with half a brain.

The punctuation in this column is accurate, although a colonoscopy was performed to remove all extraneous colons.

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No animals were injured in the making of Good Week/Bad Week. OK, once I swatted a fly.

Good Week

1. Cheese Lovers

In one of the most bizarre cases of corporate fraud in U.S. history — and that’s saying something — the CEO and CFO of now-defunct cheese maker Suprema Specialties Inc. were indicted Monday on charges that they perpetuated a massive scam. The swindle? They didn’t actually have any cheese at the cheese shop (cue bouzouki music). “Suprema was essentially an illusion as a business and a lie for investors,” said U.S. Attorney Christopher “Chris” Christie at a press conference. “It was in business to provide a means for fraud. There’s not even an SIC code for that.”

According to reports, Mark Cocchiola, the 49-year-old founder of Suprema, and Steven Venechanos, the company’s former chief financial officer, were charged in a 38-count federal court indictment. Charges include bank fraud, securities fraud, mail fraud, and ruminant fraud. In addition, at the arraignment on Wednesday, the two former executives both acknowledged that deep down, they feel like frauds. “We don’t like cheese, or milk for that matter,’ Venechanos told a judge. “We won’t even sit at the same dinner table with a carton of milk.” The judge later classified the fraud as a hate crime, telling defense attorneys “this is clearly a case of lactose intolerance.”

The indictment claims that the disgraced executives had hoped to parlay the 1997 inheritance of a large cattle farm in Hamburg, New Jersey, into a thriving cheese-making business. The alleged plan, which the two executives apparently referred two as “the 2 percent solution” in internal E-mails, commenced sometime in 2001. According to the government, the men participated with major customers to falsely inflate Suprema’s sales by creating fake invoices. Those bogus invoices — which made up the bulk of the $600 million in business with the customers who were party to the scheme — made it appear as if the company had sold cheese to the customers.

The two also allegedly convinced vendors to ship imitation cheese products that Suprema labeled as premium, all-natural Tuscan cheese. The indictment claims “this falsely boosted the value of the company’s inventory while simultaneously triggering a Pecorini panic on the Bologna Futures Exchange.” The 42-page indictment also charges that “in an attempt to maximize the assets of the inherited farm, the two hatched a plan to market duck eggs as super-sized caviar.”

In January, several of Suprema’s suppliers pleaded guilty to charges of conspiracy, racketeering, and falsifying feta. At a press conference announcing the indictment, the U.S. Attorney was asked how the two executives came up with the cheese scheme after they inherited the 700-acre farm. “From evidence gathered in our investigation, it appears that the accused seem to be big fans of ‘Matching Tie and Handkerchief’,” a reference so obscure not even Herb Stempel gets it.

Later, reporters questioned Christie about the possibility that charges might be brought against other Suprema employees. “As far as we can tell, no other executives at the company were involved,” the U.S. Attorney replied. “Company E-mails show that the fraud was conceived, approved, and executed entirely by the dairy heirs.”

2. Mitsubishi Heavy Industries

In a surprise move, management at Mitsubishi Heavy Industries this week offered to buy Westinghouse Electric Co. Giving notice to British company BNFL of its intentions, Mitsubishi Heavy added that it respects Westinghouse and is interested in the company’s mind as well as its assets. BNFL, which owns Pittsburgh-based Westinghouse, said it would give its blessing to the deal but cautioned that the company might seem less appealing once the deal is consummated.

Mitsubishi Heavy, which only recently changed its name from Minnezawa/Sotanomi Facility, Appliance and Turbine Services (Minnesota FATS), is still working on details of the bid. The Tokyo-based, German-owned business newspaper Nihon Gesundheit reported Saturday that the bid for Westinghouse will likely be around 200 billion yen (1.79 billion U.S. dollars, 1.49 billion euros, or 1.2 trillion in Confederate scrip).

Ironically, Mitsubishi Heavy, which makes nuclear reactors, bought its first fission technology from Westinghouse in the 1960s. At the time, Westinghouse was the leader in nuclear power plant construction in the United States and employed more atomic scientists than all other American corporations combined. In recent years, though, Westinghouse’s domestic sales have been surpassed by overseas joint ventures, as well as The Undersea Adventures of Jacques Cousteau (DVD, Season 1), a trend analysts say is a clear sign of the growing clout of environmentalists. Another possible sign: Engineers at Westinghouse now refer to themselves as “quantum physicists” rather than “atomic scientists” in a desperate effort to keep Greenpeace from pouring oatmeal down their car radiators.

Mitsubishi Heavy, which also makes aerospace equipment, is a leader in technologies for light-water reactors. Experts say light-water reactors do not produce significant amounts of rich plutonium waste material — the kind of material necessary for bomb-making. At a news conference on Thursday announcing the imminent deal, the company unveiled an advertising campaign which harkened back to the glory years at Westinghouse. The campaign, developed jointly by Saatchi & Saatchi and Shields & Yarnell, will be tied to an updated tagline proclaiming, “You Can Be Sure It’s Not Weapons-Grade — If It’s Westinghouse.”

Following the announcement of the planned campaign, the Bid/Ask price on Westinghouse common shrank to the smallest unit detectable by the unaided human eye.

Bad Week

Internet Users

If you need any convincing about how things work in Washington — that is, if you need any additional convincing following the Medicare Reform Bill — consider a bill now pending in Congress. The legislation, sponsored by Rep. Pete Sessions (R-Texas), would prohibit municipalities from deploying Wi-Fi networks in their towns. Wi-Fi networks, also called mesh networks by telecom analysts or flesh networks by people who see sex in everything, provide high-bandwidth access to the Internet. More important — and this is a plot line — mesh networks offer connectivity at a fraction of the cost of other information delivery systems (cable, DSL, rumor-mongering).

Sessions, who seems to be a staunch believer in the things most staunch believers believe in (rugged individualism, massive government subsidies), apparently believes municipalities shouldn’t be in the business of competing with private corporations when it comes to soaking the American public. The logic underpinning the assertion may be lost on some observers, particularly those concerned about the digital divide and the lack of affordable Internet access in rural areas. The importance of keeping government out of the Wi-Fi business becomes clearer, however, when your spouse sits on the board of a cell-phone carrier, and your second biggest political contributor is a telephone company. In announcing the bill, an aide to Sessions insisted the representative believes in “small government, free markets, and Liz Phair economics.”

Over the past year or so, phone companies have lobbied to get Wi-Fi-banning legislation passed at the state, local, and subatomic level. So far, 14 states — and three tiny fiefdoms — have passed bills prohibiting municipalities from setting up mesh networks. Executives at some phone companies say if they are not given exclusive rights to operate municipal Wi-Fi networks, the resulting lack of cash flow may force them to abandon expensive high-tech innovations. Example: An insider says one carrier has already drawn up plans to drop superfast optical networks in favor of handwritten notes.

But critics say the move is unnecessary, insisting that large telephone companies would increase sales if they’d only focus on making smaller phones. Cell-phone carriers claim such arguments overlook much of the misinformation they’ve put out there in recent months. They also argue that government-sanctioned Wi-Fi networks make a mockery of free market capitalism, and in turn, threaten to interfere with their own government-sanctioned mockeries (network surcharges, franchise fees).

Washington watchers say telephone companies have been attempting for months to get a nationwide bill outlawing municipal wireless networks. Toward that, several telecommunications companies have funded recent studies showing that Wi-Fi networks may not work, and is some cases, might actually electrocute users. One of those studies, produced by the not-for-profit ASA (Americans for Similar Americans), found that 102 percent of Internet surfers prefer to pay outrageous sums to private Internet providers rather than risk being flambéed in their own rumpus rooms. The industry-funded, phony-baloney research also revealed that mesh networks may not be profitable for decades, will be extremely difficult to set up, and will more than likely suck up all the oxygen in the atmosphere.

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