Oh MAN!!!! First Enron, now Worldcom (1 Viewer)

[Carlos_E]

Another company cooking the books. This major telecommunications company used to have a market value of over $100 BILLION. Just came out over the wire that it will likely file for Bankruptcy.
Price has gotten creamed in after hours trading. After the disclosure of the accounting irregularities, its price has dropped 50% in after hours trading just today.
Oh well, there goes my home theater upgrade.
COMMON CORPORATE AMERICA. This BULLSHIT (apologies to the administration for the foul language)with overstating income has got to stop.
Please no personal attacks so that this tread can continue.
Focus on the economic repercussions to this country.
Forget Possible terrorism, Osama Bin Laden, and the Middle Eastern Conflict. From a purely economic perspective, this WorldCom fiasco portends dire economic problems for this country. I mean this is WORLDCOM. It just got vaporized. The second largest Communications company in this country. This was definitely not a mom and pop store. The market is going to be nasty tommorrow.
Thank for the comments and apologies to the admininistration for using a bad word above but this is infuriating.
Carlos

 

[Alex Spindler]

Man, to think my company nearly merged with them. *whew*

 

[Colin Dunn]

This is really beginning to scare me. I never believed in the tech/telecom bubble to an extent that I invested my life savings in it. It always looked like a bubble to me, so I stuck to the traditional "diversified" investment plan, spreading my 401(k) out over several funds that cover different markets (bond market, small- and large-cap stocks, and a little bit of international too). My 401(k)s are down, but not to the tune of 50% ... yet.

In this environment, I wonder how capital markets are even going to continue to function. Average investors who pump their savings and 401(k) money into mutual funds are getting disillusioned as more and more news about corporate corruption hits the wires. Each time one of these stories breaks, the average Joe loses another 10% from his mutual funds, but the criminals at the top walk away with several hundred million $$$. How can a legitimate business venture raise capital if no one is willing to invest anymore ... either through publicly traded securities or privately?

More than 16,000 people are going to lose their jobs at WorldCom by the end of the week. At the current pace of job-creation (or rather, job-destruction) in the tech/telecom sector, I wonder if those people will ever find work in this field within the next 10-20 years. Economists have said that in past recessions with massive layoffs, seeds were planted for the next recovery when laid-off workers started up new, small companies. How can this be possible if all the laid-off workers get robbed of their savings (and start-up capital) on the way out the door?!? It seems much of the investment capital needed to fund the next wave of innovation and the economic recovery is going to wind up in the hands of a few hundred CRIMINAL corporate "leaders."

I'll avoid getting into politics here, but I will say this: The private sector, the government, or some combination of both MUST introduce powerful reforms, or we will be in a world of hurt very, very soon. If investor confidence isn't shored up QUICKLY, I fear we may soon enter another Great Depression. We could at least start by locking up some of these high-profile criminal CEOs ... forever...

 

[Adil M]

Alex,
I'm assuming you're a Sprint stock holder such as myself and well we aren't doing too well, but neither is the market.

 

[Peter Kim]

This affects me deeply...it hurts me badly, in every respect. I am tired of a system which favors the institution and not the individual.

CNN.com headline:

Troubled telecom firm announces overstatement of financial results, 17,000 job cuts.

These euphemisms engrage me - it may be technically classified as an 'overstatement', but it's criminal activity cloaked in CEO jargon. 17,000 jobs, 17,000 people, like you and me, lives ripped apart, most victimized by those few at the top. Unbeknownst to the hard-working employees.

Look at the market - the bear is rearing its unrelenting, vigilante head. We are entering an epoch where the entire country will pay for the rape perpetrated by the executive command.

No one should feel secure. The ripple effect is profound.

Yeah, I'm terribly saddened, but it's my anger that's rising to the forefront. For anyone who thinks the ship always rights itself, pay close attention to who's at the helm. The current SEC chairman is a former accounting executive - he is on public record stating that the system is not irrevocably corrupt. Instead, things need to be tweaked, slowly and with extreme caution.

Those in power protect their own. The masses don't know any better. Think you do?

BTW...I am a former internal auditor. I could not look myself in the mirror any longer. Agony reigned supreme daily. Corruption knows no bounds. And the public? Has no idea. Has absolutely no fucking idea.

 

[Peter Kim]

I can only imagine the overwhelming despair of those WorldCom employees whose 401(k)'s have been devastated. Unless someone can correct me, my guess is a good part, if not all of the company match was distributed via shares of company common.

Consider the following:

WorldCom stock -

~ $64 + around June, 1999.

When the market opens tomorrow, WorldCom will trade at 32 cents/share.

Madness.

Certainly, those few savvy will have exercised cautious, distributed investment. But in the boom times of the '90's, and worse, during the slump and eventual fall of Rome, the company line has always been that of loyalty by the legions.

People will die, their lives steered into infinite despair by the captains of industry. And all that we'll hear is how these villians successfully manipulate the system, ultimately evading any punishment.

Madness.

 

[Peter Kim]

Former Chief Executive Bernie Ebbers resigned earlier this year amid questions about $366 million in personal loans from the company and a federal probe of its accounting practices.

$366,000,000 in personal loans to CEO Bernie Ebbers. The fact that he even thought about doing this, not to even mention actually carrying it out, shows the total impunity and arrogance in which these CEO's think they can operate.

Where were the external auditors? Where were the internal auditors? Where was the treasurer? Where was the controller? Where was the board? Where do you think? They were all there. So...

All men...created equal.

 

[Rob Gillespie]

Hoooooly shit! Hoooooly shit!

The company I work for will find this MOST disquieting. That's all I'm gonna say.

 

[Max Leung]

To quote the Onion, from an unrelated headline:
"Holy fucking shit!"
I'm glad I pulled most of my money out of the stock market more than a year ago. Not that it was worth anything at the time.
Justice? There will never be any justice.

 

[Brian Perry]

Where were the external auditors?

Guess who? Andersen! (I'm not kidding.) Actually, I'm kind of relieved it wasn't another Big Five accounting firm; if it were, the market would be down 1,000 points today.

This continuing trend of corporate corruption sickens me. As someone trying to climb the ranks of management, I always saw the point of having the higher ranks make a lot more money. After all, there needs to be motivation for you to want to get to that level. (For example, if my employees thought I only made $1,000 per year more than they did, no one would want my job with all the headaches.) But now the impression I get is that these boadrooms are filled with people just taking care of themselves, company be damned.

 

[Philip Hamm]

$366,000,000 in personal loans to CEO Bernie Ebbers. The fact that he even thought about doing this, not to even mention actually carrying it out, shows the total impunity and arrogance in which these CEO's think they can operate.

Acttally it only shows the total impunity and arrogance in which this particular CEO thought he could operate. And failed.

 

[Peter Kim]

You're absolutely right, Brian.

Looking at the ticker on CNBC. Market's not even open yet, and we're already seeing all red.

Get ready for a wild ride.

 

[Julian Reville]

None of us are immune from the impact this will have on our economy, but I am so glad I got out of the corporate world and quit putting money into stocks, years ago. Plainly put, I just don't trust the bastards.

What's the point of fines when they have had the chance to salt away millions over the years (if they are as smart as they think they are, most of it will never be found)?

It's time for some CEOs,CFOs and a whole bunch of other assOs to start doing some hard time, making little rocks out of big rocks, in the HOT sun.

 

[Peter Kim]

Philip,
I was speaking in the context of this thread, those CEO's that exempt themselves from generally accepted accounting practices. I was referring to Martha Stewart, Tyco, Enron, & WorldCom...
You may find exception with semantics, pedantics and minutia, but absolutely no one else is.
I've got Bloomberg and CNBC on all this morning, and the talking heads are all calling for prison time for 'THESE' CEO's (yes Philip, an 's' at the end).
230 down and market not even open yet.

 

[LewB]

17,000 workers get the ax while the CFO, CEO and Board of Directors profit from the debacle. Seems to be an old story I'll save the rant about Andersen for another time.
The only thing that will get this thing turned around will be if these jokers do HARD time behind bars and are forced to pay heavy fines!
As Eddie Murphy said in Trading Places 'The only way I know of to hurt rich people is to turn them into poor people' (or something like that).

 

[EricK]

Its going to be carnage~

Eric

 

[Tom Rhea]

On a sort of related note, Adelphia, the sixth largest cable company in the US, is finally filing for bankruptcy today after its stock went in the toilet following the revelation of the fact that the (now former) owners, the Rigas family, had pulled exactly the same sort of financial bullshit as Enron.

Six months ago the big news in Buffalo about Adelphia (which is headquartered here) was pending development of a major office complex, which was going to add thousands of jobs and tons of money to our economy, which desperately needs both. That's sorta gone now. Our hockey team's future is in question -- the Rigas family owned them, too, and they've been taken over by the NHL.

I remember years ago when Adelphia took over cable in Buffalo from TCI. Just about the first thing they did was take away the soft porn channel because John Rigas is a very moral man. Ha ha.

 

[Brian Perry]

So will the Titans need to rename their stadium, ala Houston/Enron?

 

[Matt Gordon]

Worldcom shares have been halted as they lost almost all of their remaining value in premarket trading...
http://www.msnbc.com/news/772330.asp

 

[Michael Reuben]

The current SEC chairman is a former accounting executive - he is on public record stating that the system is not irrevocably corrupt.

Whatever criticisms one may have of SEC Chairman Harvey Pitt (and I'm not a fan), he isn't a "former accounting executive". Before taking his current position, he was an attorney in private practice whose client roster included several of the big accounting firms.

As a former internal auditor, I'm sure you can appreciate the importance of strict factual accuracy.

Although it's too early to be certain, chances are that the accountants were not at fault in the WorldCom mess. The WorldCom restatement results from mischaracterizing expenses as capital investments. That's typically the kind of thing for which accountants have to rely on company representatives to tell them how money was spent. If the company insists that the expenditures were R&D, or some other item that would constitute a capital investment, the accountants will have a hard time detecting the deception. I'm not saying that the system is sound, just suggesting that the fault here probably lies entirely with the company (based on what's been reported so far).

M.