Filed under: Competitive strategy, Scandals, Business of sports, Headline news

Could there be any worse fate for an Olympic level athlete than to be stripped of their statistics and medals? Yes, there could be worse things. Just ask former Olympic track star Marion Jones which is worse, losing your medals or being forced to tell your mother you’ve to sell her house.

Are these professional quality athletes really so stupid as to believe that if they get pinched for using banned performance enhancing drugs they’ll get away with just a slap on the wrist? I don’t think it’s that simple. I’m sure that Marion Jones knew what she was doing was seriously wrong and I feel certain that she knew if she got busted, the truth would come with a very high price. Now, amid all the investigations and scandal, she’s finding out just how high priced skirting the truth can really be.

For her misdeeds, Marion Jones has been required to forfeit all five of her medals from the 2000 summer Olympics and has been told to repay approximately $700,000 of her prize money. All of her standings and statistics beginning at September 1, 2000, shall be red-lined in the record books and her medals from other competitions have been taken away also.

From this day forward, Marion Jones shall probably have no true rest. Such a wide swath of investigation has been opened, that the investigative leads may never cease. Through the investigation of a ring of steroid users and providers with which she was associated, it has also been shown that Marion Jones had at the very least casual ties with a high-stakes check and money laundering scheme. Let us not forget also that she’s allegedly guilty of making false statements to federal investigators.

I wonder if her days of ill-gotten glory were worth the gut-wrenching misery that she has to be suffering right about now. It’s the obligation of every one of us to impress today’s budding athletes with the seriousness of cheating at each level, and Marion Jones serves as prime example to teach that lesson. Unfortunately, I think that the pervasive attitude in sports these days is the mantra that Marion Jones fell prey to: You do what you need to in order to win and it’s only wrong if they catch you. Instruct your children that it’s wrong to cheat. Integrity keeps you healthy and lets you sleep at night. In my record book that’s a win.

The bad news is that for each professional athlete who gets nailed for using banned performance enhancing substances, there are probably 30 others who will get away with it uncontested. To them all I have to say is:

I guess you’re not the bad ass you think you are, schmuck.

Be sure to check out other Money Losers of 2007.

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Filed under: Financials and analyticals, Raising money, Private equity industry

BusinessWeek reports that The Bear Stearns Companies (NYSE: BSC), which reported earnings today, is behind $10 billion worth of Collateralized Debt Obligations (CDOs) at Citigroup Inc. (NYSE: C) and Bank of America (NYSE: BAC). It all comes down to yet another new word to add to your financial vocabulary — Klio Funding — a brand of CDO that enabled Bear to sell to the $2 trillion money market fund industry.

What is Klio Funding and how did it cause all this damage? Klio Funding is “an entity” that sells Commercial Paper (CP) — short-term loans — and uses it to buy higher-yielding long term investments. Since Citigroup had concurred to refund investors’ initial stakes plus interest — through liquidity puts — money market funds that purchased Klios thought they would get higher yields at low risk.

Meanwhile, Ralph Cioffi — who headed up three Bear hedge funds which eventually folded — used money raised from the Klios to purchase CDOs and to lock in year-long financing for his hedge funds. This is significant because hedge funds typically can only borrow money for weeks at a time due to their risk. Cioffi’s CDOs were popular, raising $100 billion.

The Klio structure turned out to be a pyramid scheme according to Yale University economist Robert J. Shiller. As new investors arrive to the party, they bid up prices, boosting returns for those who got in earlier. The huge gains attract more investors, and the cycle continues — as long as the players don’t try to take out their money en masse.

That’s exactly what happened this spring. Cioffi tried to sell more CDOs to raise money to prop up the hedge funds he managed. But just after raising $4 billion in Might, his hedge funds imploded, wiping out $1.6 billion of investors’ money. In November, Citigroup and Bank of America wrote down some $10 billion in CDOs thanks to their liquidity puts. The financial system faces at least $500 billion in write-downs — creating a huge capital hole that needs to be filled.

The lesson for investors is clear. If you hear lots of new vocabulary words coming out of Wall Street, someone is making huge amounts of money in the short-term that’ll eventually blow up, leaving others to pay the costs. If you’ve invested in something with a name you don’t comprehend, find out what it is. If it sounds too good to be true, it probably is.

We already know that James Cayne, Bear’s CEO, is paying the price by not getting a bonus. The question is whether he’ll be able to keep his job.

Peter Cohan is President of Peter S. Cohan & Associates. He also instructs management at Babson College and edits The Cohan Letter. He owns Citigroup shares and has no financial interest in the other securities mentioned.

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