Citigroup Inc. (NYSE: C) chief executive Vikram Pandit announced plans today to shut down Old Lane Partners. This was a hedge fund group that he co-founded and sold to the bank last year for more than $800 million. A regulatory filing showed that the bank took a first-quarter charge of $202 million to write-down the value of its investment in Old Lane, which contributed to its $509 million hedge fund unit loss during the quarter.

Ousted chief executive, Charles Prince, called the transaction "an investment as much as it is an acquisition" last April when the deal was completed. Many saw the deal as a way to recruit Pandit as well as John Havens, who was promoted in March to head of investment banking, trading and hedge funds. It turns out that the deal wasn't a great investment or acquisition as Citigroup took a dive as a result of hedge fund losses.

At least shareholders can be sure they weren't scammed. Pandit may have received $165.2 million last year for his stake in Old Lane, but he reinvested $100.3 million, after tax, into the fund, according to a regulatory filing. This means that he is on the hook for just as much of the losses as many of the other investors. It appears that this was simply a case of poor timing for Citigroup and poor asset investment choices by Old Lane.

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Krispy Kreme Doughnuts (NYSE: KKD) has been beaten up since its heyday and remains 75% off of its 52-week high. However, the troubled company reported strong earnings on Monday that sent its shares substantially higher and gave investors renewed hope for the future. The question is: Is this a real recovery or just a temporary blip on the radar screen before more declines hit the stock?

Krispy Kreme shares spiked nearly 8% yesterday after the company announced first quarter earnings of 6 cents per share compared to a loss of 12 cents per share during the same quarter last year. However,revenue for the first quarter fell 6.6% to $103.6 million, which is down from $110.9 million a year earlier. The decrease was due to a 10.3% drop in company stores revenues and a 2% drop in supply chain sales.

The increase in earnings is only due to a large write-down last year due to the refinancing on some debt. As a result, shareholders should not take this as any kind of major improvement in cost savings or other measures. Rather, the decline in revenues makes its quite clear that the company continues to face significant problems ahead that may erode shareholder value.

Krispy Kreme continues to feel the pressure from the industry slowdown. The chain opened 28 new stores during the first quarter while seven franchises closed. The company said it expects more franchises to close in the future and "the number of such closures may be significant". However, investors again shrugged off these comments and sent the stock higher after the announcement.

The chain also warned against the effects of higher raw material costs. The jump in food prices has led to a sharp increase in costs that the company may have trouble passing on to its consumers without hurting revenues. The result could be further margin pressures that could adversely effect shareholder value. In the end, it could be another couple of quarters before investors see any real signs of improvement for this company.

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Yahoo Inc. (NDAQ: YHOO) is facing more heat today after Carl Icahn sent another letter to the Board of Directors today expressing disappointment in their lack of a response to his concerns. The activist investor's previous letter had demanded that the troubled search company immediately sell itself to Microsoft in order to best serve shareholder interests. It will be interesting to see how Yahoo responds to this letter:

Dear Roy:

After reading Yahoo!'s press release put out on Friday in response to my letter of that morning, I cannot help but wonder if you even read my letter.

Again, Yahoo! keeps repeating misstatements in the hope it will convince its shareholders that these misstatements are valid. I cannot understand why the Yahoo! board feels so strongly about its "poison pill" severance plan and why it continues to refuse to rescind it. How can you continue to repeat that your severance plan is in the best interests of shareholders and employees? Indeed, Yahoo!'s own compensation advisor called the severance plan "nuts." Is it not true, as the shareholder complaint stated, that Microsoft's CEO earmarked $1.5 billion for employee retention (a benefit you neglected to tell your employees about)? Is it not better to incentivize employees to stay in their jobs than to quit? Instead of just continuing to repeat the mantra that we have made an inaccurate interpretation of your severance plan, why do you refuse to go into detail as to why our interpretation is incorrect? Additionally, a New York paper reported this weekend that "sources close to Microsoft said the severance plan was a 'big issue' when deciding what price they could pay for Yahoo!"

In your press release from Friday, you stated again that I do not have a credible plan for Yahoo! Did you even bother to read my letter, which went into great detail on what measures I would ask the new board to take? Ironically, while you keep inquiring about my plans, it is interesting to note that Yahoo!'s board has been busy reaping great compensation benefits. Indeed, you made approximately $10,000 per week last year -- not bad for a board member. I believe most of your shareholders would be interested in seeing your time sheets -- especially in light of the fact that, in my estimation, most of your so-called "plans" over the last few years have been failures. Remember the old adage -- those who live in glass houses should not throw stones. Perhaps most importantly, under my plan, I would ask the Board to bring in a talented and experienced CEO to replace Jerry Yang and return Jerry to his role as "Chief Yahoo!" It is extremely important to note that Google hired a great operator as a CEO who helped to transform the Company into a giant at the expense of Yahoo! According to publicly available financial information, while Google's income from operations grew 59% per year over the last two years, Yahoo!'s income from operations shrank 21%. What was the board doing over this period? Where was their great "plan"? I believe a new CEO with operating experience might well have had and might still have a very salutary impact on Yahoo! I ask again what your great "plan" has been over the last few years. Why did you permit Google to leave you in the dust?

I outlined a number of questions in Friday's letter. Why don't you do me the courtesy of answering my questions as I have answered yours?

Sincerely yours, CARL C. ICAHN

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