WorldCom CFO Accused of $3.6 Billion Fraud

winter was among the first to point out that allegations of fraud have led to a massive stock drop at WorldCom. A flurry of stories have popped up on Yahoo!, none of them good news for WorldCom. CFO Scott Sullivan is accused of misstating the company's revenues, specifically its earnings before interest, taxation, depreciation and amortization (aka EBITDA), and the stock has slid more than 50% (as of this writing) in after-hours trading.

Comments

Oops!

[Anonymous Coward]

Sorry about that... I didn't think anyone would notice the missing money. I've got IOU's for all of it.

Re:Oops!

[macdaddy357]

All publicly traded companies are cooking the books, because there is no watchdog to catch them. They bought off our legislators a long time ago, and got deregulated. Not only that, but investment firms like Meryll Lynch defraud investors as way of life. Here are two investment plans much safer than the stock market. Conservative - Put cash under you mattress. Aggressive - Go to the track, and play the ponies.

Re:Oops!

[rodgerd]

Well, it's not like there's any downside. Sell someone dope, go to a maximum security jail and be anally raped for the rest of your life; destroy thousands or tens of thousands of peoples' lives and you get a slap over the wrist.

We give these things special names ("white collar crime"), don't police them especially rigourously, and allow people to escape liability hiding behind limited-liability constructs, so why wouldn't you take the risk?

Re:Oops!

[grytpype]

Publicly traded companies are actually pretty heavily regulated in terms of their financial disclosures. The problem is the companies are conspiring with the first-line watchdogs (the auditors) to lie about their finances.

That's how Enron became one of the top ten companies in the US, when it was totally illiquid and on the verge of bankruptcy.

It's kind of an arms race, because if your competitors were doing it, you had to do it too.

Re:Oops!

[stox]

Bernie, I thought you never posted to slashdot. ;-)

Re:Oops!

[lrichardson]

One of the saddest realities is that police spend 99% of their (theft) investigative time on violent theft, which accounts for less than 1% of all money stolen. White collar crime, which accounts for better than 99% of all money stolen, receives less than 1% of their time.

It's really sad in the corporate sector, since even admitting you have been stolen from causes a drastic drop in your stock value. From the typical corp's point of view, better to let Joe Schmoe get away with a couple of hundred grand, than publically go after him, and lose millions on the stock market.

Martha saved herself somewhere between $40,000 - $80,000 through (allegedly) insider trading. Her stock value (MSO) has dropped around $200,000,000!

You can bet Sullivan has sold vast quantities of his stock, and invested it elsewhere, before this news broke. As long as he hasn't broken any laws (and corporate types excel at this, as they have highly paid lawyers to arrange immoral actions in a legal manner), his personal assets are untouchable.

Re:Oops!

[Cramer]

The stats are very easy to explain... It actually takes time to perform a detailed investigation in the cases of violent theft. The insidious, "white collar" crimes take almost no time to investigate -- once the crime is detected, they pretty much already know who did it and where the money went.

Which is easier to track down:
a) a bunch of guys wearing ski masks storming into a bank with guns, or
b) the bank manager stuffing a stack of 20's in his pocket when he leaves for lunch everyday?

The police investigate "a". It's very obvious the money is gone. The hard part is now in tracking down who took it. The bank investigates "b". It's rather difficult to see money is missing -- no one opens the vault one morning and half the money is gone. Once someone notices there's money missing, it's a very short trip to find out where it's going. And then the police are called in.

In one case, it's obvious a crime has been commited. In the other, it isn't.

Re:Oops!

[Afrosheen]

Good point, that's pretty accurate in my opinion. Of course, Lex Luthor in Superman IV had the best plan of all. Steal tenths of a penny from all the banks. They'll never really see them disappearing but you'll see them adding up. Refresh my memory if you know the details.

By the way Luthor would've gotten away with it too, if it wasn't for that damn Superman.

Re:Oops!

[JimPooley]

That's because dope dealers don't give billions to the political parties each year and big business does...

Re:Oops!

[restauff]

I wouldn't be a good /. reader if I didn't jump to correct your errors here, but being a Superman fan, I must. It was Superman III, not Superman IV, that had the banking plot, and it was Gus Gorman (Richard Pryor) who thought up the plot. Lex Luthor didn't even make an appearance in the film.

Re:Oops!

[JimFromJersey]

> All publicly traded companies are cooking the books,

The irony is that this is exactly what investors demanded. Both institutional and private investors demanded unsustainable profit levels in order to inflate portfolio values. Now they are crying because they feel that they have been cheated. They wanted a magic show, they got the smoke and mirrors that they asked for.

Re:Oops!

[Afrosheen]

Excellent, that's what I requested, a correction.

Where was Luthor this time around? We all know Pryor failed, post-speedball-explosion.

Re:Oops!

[Anonymous Coward]

They spend most of their time investigating violent theft because violent theft very easily has the capability of being assault or murder, whereas white collar theft doesn't.

With violent theft (aka armed robbery), the threat is explicit...give me the money or I will kill you.

Someone stealing a million dollars should be treated more harshly than someone stealing a CD, but lets not kid ourselves by saying that the million dollar theft is more of a crime than the homeboy gangbanger that holds up a 7-11 for $20.

Theft of millions of dollars and armed robbery of 50 cents with explicit threat of death are not the same class or types of crimes and should not be judged with similar punishments in mind.

Re:Oops!

[rodgerd]

Uh, no. Quite the opposite, in fact.

Prosecutors and law enforcement are extremely reluctant to go after anything but the simplest cases of fraud (cheque scams, credit card theft, and so forth) because they are so complex and require a huge amount of specialised expertise; on top of that, fraud has a significant MEGO factor, and the defendants tend to be pillar of the community types, rather than easily convicted dirtballs.

For example, the reason the New York DA settled with Merrill Lynch in the case for their allegedly fraudulent promotion of dud stocks. Even though, to the public, it looks pretty open and shut (analysts leave document trail complaining that they're being forced to say good things about bad companies), the DAs office decided the difficulty of obtaining a conviction was such that it was better to let Merrill Lynch off with a trivial fine and no admission of guilt.

Re:Oops!

[Anonymous Coward]

Sell someone dope, go to a maximum security jail and be anally raped for the rest of your life

Nothing wrong with that at all.
If you sold dope to my kid, that would be the best thing that happened to you.

An even though..

[Axe]

..anybody else has little to do with WCOM, the whole market is going to plunge..

Sigh.. Our professor was right - there is no science in investing.. Price goes down when everybody sells.. Up - when everybody buys.. Who cares what is actually going on..

Re:An even though..

[Anonymous Coward]

Actually, there is science in investing. Its called Sociology.

Re:An even though..

[macdaddy357]

Yes, stock speculators are a bunch of lemmings.

Re:An even though..

[sketchkid]

no, investing is a science. you just proved it. its a social science. the stock market is completely based on demand and, consequently, the supply to squelsh that demand.

nobody should actually care what is going on. ive seen a simple fork from a college cafeteria sell on ebay for $15. does that price seem correct for the product? hardly. ebay proves that people will pay for stuff that is literally worthless. but oh wait, its not worthless if people are willing to pay for it.
the capital system is, by definition, and efficient market. all company news is built into the current stock price, therefore what you are really paying for when buying a stock is the expectation that the company will prosper in the future. this will breed good news, which will then appropriately help people value in the stock in a new context. that is why a stock like amazon was a high flyer during the late 90s. the expectation that amazon was going to take out brick and mortars, and the fact jeff bezos was time magazine's man of the year all helped boost the expectation and perception that the stock would be worth a higher price in the future. therein, lies the science: you buy a company that will do well enough to give a perception ,whether through performance, news, or hoopla, that the stock will be worth more in the future than at the current moment.

Re:An even though..

[Anonymous Coward]

thanks for cribbing from an anonymous coward, karma whore.

Re:An even though..

[Ungrounded Lightning]

An[d] even though anybody else has little to do with WCOM, the whole market is going to plunge.

For good reason.

1) Worldcom is MCI and UUNET. MCI is the first of the competitive long distance companies and the second largest telecom. UUNET is the first commercial ISP and one of the largest. Both may just go away now.

2) Bankruptcy of something as large as Worldcom can affect a lot of other operations. While the people who buy the pieces will probably keep them running, the people they bought equipment and owe money to can probably kiss it goodbye (along with future orders they were counting on and building equipment to fill). So can everybody who bought their stock or bonds: Banks, retirement funds, money market funds, bond funds, corporations who parked some of their cash reserves in those funds, ... You'd be surprised who will be hurt, because you don't know who has exposure. The investors don't know who either, so they'll avoid everybody until they find out.

3) Also if they go belly-up, their stuff gets sold at bankruptcy-auction prices, like ten cents on the dollar or less. Equipment winds up on E-bay and equipment manufacturers find themselves competing against their own stuff. Bottom drops out of market and equipment manufacturers suffer still more. If the buyers keep MCI and/or UUNET running, they now have working networks for which they paid nearly nothing. So they can drop their prices almost to the cost of operation and undercut competitors who had to pay for (and are still paying for) their equipment. The other tecoms and/or ISPs tighten belts further and/or start operating at a loss and also go belly-up. Down go more suppliers, more investors, more associated industries. Maybe some of THOSE go belly-up, and the fire spreads further.

4) It's another accounting scandal. (Anderson again. Oops.) This will make investors leery of other companies, raising the perceived risk of further financial scandal. ("Once is chance, twice is coincidence, three times is enemy action.") The value of stocks and corporate bonds is ONLY what people are willing to pay for them at any given instant, and people base their valuation on perceived risk vs. benefit. If the risk just got bigger than the benefit, they won't trust stocks and bonds and won't buy them. The whole market tanks.

A broad drop the market from this makes perfect sense to me.

Re:An even though..

[Anonymous Crowhead]

..anybody else has little to do with WCOM, the whole market is going to plunge..

And the sad thing is, is that this is going to be caused by a company that was trading at 62 cents before the news hit.

Re:An even though..

[bluegreenone]

This is an interesting comment with many good points, but let's examine #3.

If the buyers keep MCI and/or UUNET running, they now have working networks for which they paid nearly nothing. So they can drop their prices almost to the cost of operation and undercut competitors who had to pay for (and are still paying for) their equipment.

If their equipment is put up for auction, all those competitors out there will have an equal chance to bid up the prices. So it doesn't make sense to say that equipment will go for nearly nothing, allowing huge prices cuts. If the equipment is cheap enough everyone will bid on it, and it won't go for nearly nothing anymore.

Also, don't ignore the positive effects that a cheap equipment auction could have. Maybe some company will be able to keep a few more employees with the money they save buying used MCI racks.

Re:An even though..

[Anonymous Coward]

Maybe some company will be able to keep a few more employees with the money they save buying used MCI racks.

This is our situation, we have a datacenter built with ebay purchases, running cheap commodity servers all on the sniff of an oily rag. Because our IT costs are low.... lol, we are much more competitive in the services we offer as each hour carries less overhead when we charge.

Most of the stuff was bought after the dot.com melt down.

mocom--

Re:An even though..

[vadim_t]

Huh? "Equipment winds up on E-bay and equipment manufacturers find themselves competing against their own stuff.". I don't get it. Are you agreeing with RIAA and other idiots about that reselling something at a low price without the manufacturer getting paid a second time is somehow wrong? That equipment had been bought once, and that's all the manufacturer is and should be entitled to. If I want to sell $1000 hardware for $1 it's nobody's business.

Re:An even though..

[Anonymous Coward]

who cares whose business it is? that's not the point. the point is that when they have to compete against themselves, they will sell less new hardware. and thus, their businesses may be affected.

Re:An even though..

[Anonymous Coward]

Worldcom is MCI and UUNET. MCI is the first of the competitive long distance companies and the second largest telecom. UUNET is the first commercial ISP and one of the largest. Both may just go away now.

That might be more serious than it sounds.
Worldcom owns a lot of international and intercontinental backbones (including, if I'm not mistaken, more than half of the total bandwidth between Europe and the US) - if it goes down, that could make the commotion around KPNQwest look like a storm in a teacup.

I don't find the page anymore, but some time ago they boasted on their web site that (quote from memory, probably not 100% accurate) more than half of the international traffic worldwide passes through worldcom lines at at least one point.
I even STR that instead of "half", it mentioned a percentage above 50% - something like 70 or 80.

It still says this:

93,000 network route miles, including terrestrial and undersea cable
More than 67,000 buildings worldwide connected to WorldCom network

This map shows you what might disappear.

Re:An even though..

[egregious]

1) Worldcom is MCI and UUNET. MCI is the first of the competitive long distance companies and the second largest telecom. UUNET is the first commercial ISP and one of the largest. Both may just go away now.

Technically UUNet was the second commercial ISP. PSINet switched from not-for-profit before they did but UUNet was formed first.

Re:An even though..

[coastwalker]

Quite - I care what is going on for several reasons

firstly my pension is invested in these crap shares

secondly the company I work for has to give improving shareholder value in a market place where the yardsticks we are measured against are either businesses which are lying, or businesses which have share values based on the judgement of morons wearing designer clothing (cost to make $2 cost in the store $200).

Thirdly if this realy gets out of hand we will have an old fashioned recession - you know no jobs, no food, no fun

What the markets need is regulation. No business should have to compete in an environment where their competitors can break the law, cheat and lie.

Re:An even though..

[coastwalker]

Its not a science when the perception of the people valuing the stock is misled by crime or the people valuing the stock are participating in events of mass hallucination.

Re:An even though..

[RedX]

I think you're missing the point. Nobody is saying that Cisco deserves to be paid again for a router that WCOM has already paid for. What is being said is that if WCOM's assets are sent to auction, a company that is looking for a Cisco router now has one more used router to bid on rather than purchase a new router from Cisco. That's money that isn't going to Cisco and won't be increasing their revenues.

Re:An even though..

[SnafuX]

If their equipment is put up for auction, all those competitors out there will have an equal chance to bid up the prices. So it doesn't make sense to say that equipment will go for nearly nothing, allowing huge prices cuts. If the equipment is cheap enough everyone will bid on it, and it won't go for nearly nothing anymore.

And how many corporations do you know actually watch Ebay for the purpose of buying equipment. What's more is that most corporations will *not* buy stuff off ebay because the equipment doesn't come with the service agreements and warranties offered from the mfr at buy time (new equipment) so I would not say that your comment is one that holds much merit in that respect.

Just because the opportunity is there doesn't mean that there is equal opportunity to take it. In direct opposition to your comment, *everyone* will *NOT* bid on it. In fact, only the smaller people (companies) looking for cuts in price thus attempting to become competition to the big guys will be the ones who will take advantage of such things as ebay. That's not necesasrily a bad thing either. I am all for a competitive market.

Re:An even though..

[darkov2]

I've always thought that this was a stupid reaction, but remeber that fear and greed rule the street, you can't do anything about sentiment, it's rather irrational. The best thing you can do is shrug and buy some index put options or warrants and at least profit from other peoples stupidity.

Re:An even though..

[Anonymous Coward]

>the capital system is, by definition, and efficient market.

So it's a lot like religion. The world is perfect as it is because God wills it to be so. Imperfection is, by definition, impossible because omnipotent God wills everything to be the way it should be.

Talk about faith in a belief system... Capitalism has plenty of warts. Efficiency in the marketplace? K-mart is located 1 block away from Wal-mart. What's up with that? People purchase Microsoft software because it's the best for the money?

Re:An even though..

[buckeyeguy]

Corporations may look on EBay for this stuff, but more likely they will find it through resellers that buy it through auction/liquidation; the 'remarketed' equipment market is a large one, and it's where my company buys much of its IT hardware. Benefits vs. EBay are service and support; the remarketed stuff can be certified for original vendor support, whereas with an 'all-sales-final' vendor, you take your chances.

Re:An even though..

[SnafuX]

Which is the price of doing business. I know this has little bearing on what you were posting (by simply trying to make a point) but I thought I would do the same based off your comment too. ;)

Re:An even though..

[eyepeepackets]

I have to disagree because you're describing the situation from the point of pure economics theory when we don't have a pure economics situation and haven't had for many generations.

When government pretends to regulate and then turns their collective heads the other way so as to see no evil, the results are clear: most people are lead to believe they are protected from the evil, whilst the evildoers know they have a huge flock of sheep to shear.

In other words, the government folks (how odd, it's usually the same...) set up the corporate folks (...group of folks, hmm) to shear we, the sheep.

And don't get me started on the whole Demos are better than the Repubs bullshit. White chocolate or dark chocolate, it's still chocolate. To say there are significant differences between the two is to ignore history of the past 50 years. There are very slight differences, which are played upon enormously to suggest more differences than really exist: It's the same bunch of folks agreeing to disagree so as to generate an aura of difference whilst setting us up to be shorn yet again (and again and again.)

Ack, too much, sorry.

Re:An even though..

[sketchkid]

well in a pure capitalist system (an efficient market) there would be no goverment regulation. so i think im still standing on two feet.

Re:An even though..

[moeller]

the capital system is, by definition, and efficient market. all company news is built into the current stock price, therefore what you are really paying for when buying a stock is the expectation that the company will prosper in the future.

That system is called the Efficient Market Theory. The strong version--which says that the stock price includes all information that is knowable about the company--is dead wrong. It's utter bullshit from some economic academics with their noses shoved too far into their books to look at what's actually happening. In fact, there's this little investment strategy used by some well known people--Warren Buffett, Benjamin Graham--that depends on that theory being wrong. That is, that the current price of a security does not match its intrinsic value. It is called value investing. The basic strategy is that of buying companies (or parts thereof) for less than they are worth. It tends to work quite well. It's a strategy that people understand when going to garage sales, but they for some reason cannot apply the same idea to the sale of corporate stock.

Re:An even though..

[sketchkid]

oh yeah, youre right. if the Efficient Market Theory was true, then it would be impossible to make any money in the market. only if a person had insider information would they be able to make money. value investing is what everybody does. unfortunately, we often value the future value, than the current undervalue.

history in the making

[telstar]

The new form of terrorism ... internal sabotage. These guys should be held accountable not only for the losses of this company, but the overall impact that this crap has on the U.S. Economy.

Re:history in the making

[WanderingGhost]

These guys should be held accountable not only for the losses of this company, but the overall impact that this crap has on the U.S. Economy.

You mean the international economy, which is heavily influenciated by the US economy, right? ;-)

Re:history in the making

[yesthatguy]

That's kind of hard to do, because I'm not aware of an international organization which can claim jurisdiction and be in a position to apply and enforce a punishment. The US can hold them accountable for what they've done to the US, but it's hard to do it on an international level.

Re:history in the making

[_ph1ux_]

"I'm not aware of an international organization which can claim jurisdiction and be in a position to apply and enforce a punishment

dont we already have an organisation for global jurisdiction over anything and everything: the US government

If you havent noticed - the US government is slowly pushing itself into the world governors chair and forcing every nation on the planet to comply with our desires. I mean we just told Arafat that his time is ended - and we announced that we are basically going to form a palistinian state within 3 years. Name another country/government that has so much power as to be able to form nations by verbal command

I mean we already use the US military to help enforce what the government wants - how would this be any different.

Re:history in the making

[grytpype]

Oh, let's just string him up by his entrails. Skip the formalities and legalisms!

Re:history in the making

[ErikZ]

Yeah, the horror. Stop treating your people like the stuff you scrape off the bottom of your shoe.

Re:history in the making

[ScumBiker]

First off, Worldcom is simply screwing itself. Unfortunately, millions of people are going to feel the pain.

Now, on to the fun part...

You said "dont we already have an organisation for global jurisdiction over anything and everything: the US government".

WHY THE HELL NOT? The rest of the world is mostly a putrid cesspool, from what I've seen on TV, the net, and magazines. Europe and Japan are mostly cool, but the rest of the planet, at least from the point of view of being a human being, sucks. Nobody else is stepping up to the plate, so it looks like it's up to us, the U.S. people. do you really enjoy seeing people starve to death, get tortured endlessly, like in abject squalor, all because some petty dictator or mullah decides he wants to mess with their lives? I say, if we can do something about it by attempting to bring democracy to them and it makes us look like a world government, great. Let's get on with it. I'm actually VERY glad to be a part of a nation that has the power to form other nations by verbal command.

Re:history in the making

[Anonymous Coward]

Have you ever heard of the UN?

We need Global Democratic Governance -- not US Empire... shudder.

Re:history in the making

[Anonymous Coward]

>>You said "dont we already have an organisation for global jurisdiction over anything and everything: the US government".
>
>
>WHY THE HELL NOT? The rest of the world is mostly a putrid cesspool, from what I've seen on TV, the net, and magazines.
>Europe and Japan are mostly cool, but the rest of the planet, at least from the point of view of being a human being, sucks.
>Nobody else is stepping up to the plate, so it looks like it's up to us, the U.S. people. do you really enjoy seeing people starve
>to death, get tortured endlessly, like in abject squalor, all because some petty dictator or mullah decides he wants to mess
>with their lives? I say, if we can do something about it by attempting to bring democracy to them and it makes us look like a
>world government, great. Let's get on with it. I'm actually VERY glad to be a part of a nation that has the power to
>form other nations by verbal command.

And there you have it folks. summed up in one paragraph is the arrogance and pigheadedness that makes the US one of the most despised countries in the world.

Re:history in the making

[Hanno]

Reality check: The US government does not want
to join the effort of creating an international,
independent criminal court.

Why?

Because they (the US government) don't want to
be accountable to anyone else for their actions.
They don't want US citizens and especially US
soldiers to be checked against the international
rules of e.g. Human Rights they claim to defend.

This is their actual reason.

See the recent reports about the "Hague Invasion
Act" of US congress.

I fear a superpower that doesn't want to be
accountable.

Gee

[Anonymous Coward]

Gee, what a suprise. Big corporations committing massive fraud. When are you looneytarians going to figure out the biggest threat to our liberty comes from big corporations, not the government?

How many more...

[Anonymous Coward]

companies are built on bullshit financials, designed only to enrich the CEO, the board of directors, and the rest of the back-slap country club boys network?

Re:How many more...

[Anonymous Coward]

I think you might find that LNUX(slashdot's parent corp.) would fall into that category. Haven't you ever wondered why Cred.SuisseFirstBoston was fined like $100 million(USD) for it's dealings with the LNUX IPO? What does $lashdot produce anyway besides this crappy-arse message board for trolls?

Re:How many more...

[Anonymous Coward]

Here's the link: Credit Suisse First Boston Fined $100 Million

A couple of people wrote in to note that Credit Suisse First Boston, which was the underwriter for VA Linux IPO, has been fined $100 million for actions they took

In other news

[loraksus]

The sun rose in the east today.

I wish I was Martha Stewart

[Anonymous Coward]

So I could've profited off of some insider trading.

jeez

[tiwason]

I love how they pin it on one guy.... like it was all his fault. but we fired him now...

Re:jeez

[__aasmho4525]

to add to this:

it is absolutely disingenious to hear executives say "we're shocked, shocked and appalled!" when you know DAMN WELL that accounting practices are rarely able to be hidden in the dark when they're THAT excessive... (especially when it comes to capitalization in my experience)

former employers of mine literally used to reprimand us when we didn't capitalize all our labor (which was clearly illegal in those particular cases, and everyone knew it well, but they'd actually try to defend the actions by suggesting that the accounting laws are being CHANGED in our favor in the near future).

there's never "one person" at fault for these situations, and whistleblowing is a tricky option....

either way, i enjoy seeing them (the unsavory executives) personally fail, but i hate the wake they leave in their rapid descent.

cheers.

Peter

Re:jeez

[DNS-and-BIND]

Whew. Good to hear that with the firing, the problems are gone.

I'm also glad things like this only happen to American companies. The European economy is apparently immune to these sorts of scandals, which is a breath of fresh air.

Re:jeez

[s.fontinalis]

If he wasn't solely responsible - why did they pay him so damn much?

Re:jeez

[Anonymous Coward]

slashdot's parent corp. LNUX once traded at over $250 a share, now it's under $1. I hope that it was incompetence that's responsible for this massive devaluation and not something much uglier. Regardless of the cause $lashdot's financial fiasco gives the linux community a bad name. Please do us all a favor $lashdot, and close shop, You are embarassing us!

Here's what you need to do to restore credibiliy:

bash-2.05$ shutdown -h now

Re:jeez

[HiThere]

It was definitely incompetence. It was never worth $250 a share, or even half that. But there was plenty of incompetence to go around. Yahoo was never worth was it was trading for, neither was Amazon. Amazon is certainly a good business, but it was clearly extremely over valued a year ago. Everyone was buying on the pyramid plan.

O, sorry. I took you seriously. I should have realized that it was intended to be funny.

Re:jeez

[sinserve]

Don't listen to this guy, please, I beg of you don't close shop. I mean, what
would I do? read kuro5hin or something? or god forbid, I might even resort to
playing with my kid or even ... ah, noooooo

Re:jeez

[Hollinger]

The problem with corporations is that they are legal entities. For example, if you sue Microsoft, you're suing "Microsoft Corporation" itself, not Bill G. or Steve Ballmer or it's legal department. As such, a corporation can be found guilty of crimes. The question becomes, how do we punish a corporate entity that's already in debt for several billion dollars. Wrap your head around that. What we do now is try to pin it on someone inside the corporation. In our society, you go as far up the corporate ladder as you can, until you reach an unlucky scapegoat.

Well, that was a nice little rant.

Re:jeez

[gengee]

We give them the Corporate Death Sentence - revoke their charter.

Re:jeez

[nelsonal]

The point of the parent is that once a company is in debt as much as WorldCom is, its basically on life support anyway, so revoking the charter doesn't accomplish much.
I don't see why everyone is so excited about this news breaking, it's certainly surprising, but what were you expecting from a company that has already lost 90% of its value since January first. I would guess that most equity investors had written off their stock prior to today. I'm sorry if you didn't, and I really feel for you if you owned the bonds, since it looks a whole lot less likely to make it now.
Finally, this is pretty common following a boom bust cycle, managment starts pushing the rules to make their estimates, that are too high, and like a lie, they have to do increasingly large and tricky adjustments to continue to make them. When their business doens't recover, they finally run out of tricks, and the whole thing falls apart. It sucks when it happens, but the cycle is a part of business, and will always be.

Re:jeez

[WNight]

While this definately would be a good start, it doesn't go far enough...

There need to be more limits to this "legal entity" thing. If a corporation breaks laws there are people behind it who ordered that these laws be broken. They need to be punished (jail time, fines that really punish - everything they made and then some) in such a way that will ensure they don't just form another of these legal entities and do it again.

As someone else in this thread noticed, exec always have golden parachutes, usually they come out smelling like roses even if personally linked to crimes dastardly enough to put a poor person in jail for a lifetime.

Re:jeez

[Locke!Erasmus]

You have a point there. I think this might have been a bit of spin on Worldcom's part, in exactly the manner you describe. I think it is going to backfire on them because a lot of people, especially at the top levels of a large company, simply must know what is going on in order for that company to operate at all. One or two people or even the finance department cannot hide 3.6 to 3.8 billion dollars in improper accounting from their colleagues and fellow executives. The analogy I would draw to this tactic would be one in which every phone representative in a call center was cursing at customers, and yet the call center's manager claimed no knowledge of the problem when confronted about it. Even if the manager did have no knowledge, they surely are responsible to some degree for the actions of their subordinates. The CFO was a sacrifical lamb. Unfortunately, with a lot of guests coming to dinner, more lamb is needed.

Re:jeez

[Locke!Erasmus]

Surely you are not implying that the purchase of slashdot caused a $249.00 per share drop in LNUX stock price?

Re:jeez

[plumby]

It's OK. They've sacked 17000 other people as well.

Re:jeez

[Afrosheen]

One thing to keep in mind here is that stock value sometimes has little semblance to the *actual* value of a company. Worldcom is still in business and still bringing in heaps of positive revenue on a daily basis. Yeah, it's a big setback having this much debt suddenly appear, but it's not like most corporations don't have debt anyway. Amazon operated in the red for how many years? That's one tiny example..if the investors see improvement in the company at crucial junctures (like CFO's being replaced, etc) they'll regain confidence.

As an aside, is it just me, or are most investors (and investment houses) stuck on 'the sky is falling' Chicken Little mentality? Why can't a business take a hit these days without everyone panicking and screaming 'SELL SELL SELL!!!'. All I can say is, I'm glad I'm not at the reigns of a giant conglomacon like this one.

Re:jeez

[Afrosheen]

It's a known fact in the US that you can get away with absolutely ANY crime as long as you can afford it. Some examples:

O.J. Simpson: Killed his wife and her 'friend' in cold blood. Paid enough, got off. More recently, indicted in an Ecstacy smuggling and money laundering venture. Again, paid enough, got off.

President Bill Clinton: Received a hummer from an intern. Did nasty things with her and cigars. Lied in court (perjury). Paid enough, got off. (no pun intended)

Senator Condit: Had an affair with Chandra Levy. Made her 'disappear'. Sept. 11th came along and made the media forget about his whole fiasco. According to the police, never was a suspect, so he got off also. I think a month or so ago they found her remains. Not much mentioned since. Really Hoffa-esque.

So the lesson we can all learn: get rich and you can get hummers, kill people, etc. and you'll always smell rosy and never spend a day in jail.

Re:jeez

[mpe]

One thing to keep in mind here is that stock value sometimes has little semblance to the *actual* value of a company.

Quite likely more than sometimes.

Worldcom is still in business and still bringing in heaps of positive revenue on a daily basis.

Has this guy actually taken $3.6 billion out of the busines. Or is this figure related to stock market valuations.

Re:jeez

[Rogerborg]

• I love how they pin it on one guy.... like it was all his fault. but we fired him now...

It could be worse. I work at a R&D operation that supplies Worldcom. We were told last week that $50M of expected business had fallen through, and that lost us a bunch of conditional investment. And gee, now Worldcom discloses that it has $3.7B less than it thought. Spot the connection, and bear in mind that Worldcom will have put damage limitation and cost control in place before going public with this.

So now we've got an enforced company wide pay cut, compulsory redundancies with statuatory minumum compensation and no employee consulatation, and an off the record statement from HR that our contracts aren't worth the paper they're written on. The worst bit? Our CFO - the guy who booked $50M of potential sales plus conditional investment as a done deal - retains his job. Why? Because now, more than ever, we apparently need steady hands at the tiller. It's very brave and noble for the captain to stay at the helm and go down with his ship - but not if he's already asset stripped the lifeboats and thrown the entire crew overboard to gain bouyancy.

Sorry, gripe mode off. I just wanted to remind everyone that when you see headlines like these, it's not just the 17,000 poor shmoes at Worldcom that are getting stiffed. That $3.7B - and the lost investment and sales that it will cause - are going to be clawed back by cancelling orders or withholding money from suppliers, many of whom have already spent or invested on the basis that, hey, if you can't trust Worldcom to pay up, who can you trust. The hurt just spreads and spreads.

God damn but this is a bad time to be in telecomms.

Re:jeez

[Anonymous Coward]

Wouldn't it be nice, therefore, if some of those who have crowed about the obvious superiority of the US economic system over say, the European one, would apologies and then shut the hell up?

Re:jeez

[coastwalker]

You have my total sympathy - I have just watched the semiconductor sector in the UK and now Sweden go down the tubes in the latest 'downturn'.

Watching thousands of jobs being destroyed in the high tech sector makes me wonder if their are going to be any engineering jobs left.

Maybe high tech is going the way of shipbuilding, something that people do somewhere else.

Re:jeez

[Anonymous Coward]

>there's never "one person" at fault for these
>situations, and whistleblowing is a tricky
>option....

It's not hard at all. The people they are cheating happen to be very interested in such complaints: Social Security. You could have
made your complaint to the Social Security office in terms of your belief that their withholding is
being intentionally miscalculated.

The "one person" at fault is the person in the highest level of authority who knew or should have known this was happening.

Re:jeez

[sketchkid]

this is true. while this fraud may have been perpetuated by the CFO (who oversees all accounting for the firm), the data were tracked and recorded by other employees. anybody who worked on these accounts and did so much as entered a number should have their certification revoked. when lower level CPAs have their occupation at risk, they will make noise sooner about dishonesty.

Don't expect an econmic recover within 9 months. We must pay for the sins we have committed.

Re:jeez

[ejasons]

It's a known fact in the US that you can get away with absolutely ANY crime as long as you can afford it. Some examples:

• 
  
• O.J. Simpson -- Killed his wife and her 'friend' in cold blood.
  
• President Bill Clinton: Received a hummer from an intern. Lied in court (perjury).
  
• Senator Condit: Had an affair with Chandra Levy. Made her 'disappear'.
  

Okay, kids. Time to play a game. Which one of these isn't like the others???

Geez, have some perspective. A married man getting a BJ is bad judgement; lying under oath can be a felony, but rarely is convicted (and arguably isn't a crime for the president for whom separation of powers would argue that impeachment is the only recourse), but it's nothing like the others you listed (and nothing like selling weapons to our enemies, traffiking in drugs, or aiding in a multi-billion dollar energy fraud)...

Is not technology wonderful?

[Pi-Zero Meson]

God bless the technology we are blessed with I am sitting in the lab after hours watching the collapse of a multi-billion dollar company real time on the net. I love it any way time to go the popcorn is done.

Re:Is not technology wonderful?

[technoid_]

It is even better when you're using wcom services to watch it collapse.

Re:Is not technology wonderful?

[Anonymous Coward]

Beautiful. I couldn't have said it better myself.
Please score his comment up.

Another take

[bakes]

For a different perspective on this, take a look at nomorefakenews. I don't know how accurate this spin is, but it is interesting reading.

Re:Another take

[Anonymous Coward]

Yah.. Hmm... I dunno, that guy is kind of all over the place. Worldcom, Enron and the military industrial vitamin complex something or other being infected with the chinese flu. Seems like lately conspiracy theories are getting too long and complex. I never can quite make it to the end to see who is responsible for the whole mess...

Re:Another take

[Anonymous Coward]

What a load of bollocks.

Hey, Enron, Worldcom and all the rest of them are American companies, destroyed by American slackness, because of American greed.

Let's be quite clear where the finger points here - and it's not at the EU!

Oh goodie

[sunspot42]

Let's put all of our Social Security money into the stock market. The private sector could make much better use of that money than the nasty old government . . .

Better yet, let's just go to Reno and gamble it all away. Yeah!

Re:Oh goodie

[Anonymous Coward]

God damn big government sow, you fear the free market because you know your bum ass would be worthless!

Re:Oh goodie

[mrfunnypants]

No no even better lets just have it sit/wasted with the government god knows that Politicians/Government won't waste the money. Mmmmm gotta love the effectiveness there, lets see one research group got 10 million in California to see why women buy fruit at grocery stores.

As for your sarcasm, its an option for those who wish to invest their money. Of course we could just be restrictive and force everyone to do it your way cause apparently everyone is too stupid to do their own research.

Re:Oh goodie

[bnenning]

So many misconceptions in so few words. Where to begin...

• You have no money "invested" in Social Security. There is no account with your name on it (nor is there any "trust fund"), and you have no legal claim to any benefits whatsoever.
  
• Retirement investing is for the long term; the ups and downs of the stock market over a period of days or months are irrelevant. Yes, stocks are down quite a bit compared to a few years ago, but anyone who has been investing consistently for the last 40 years is still doing very well.
  
• You don't need to invest in stocks at all to get a better return than what Social Security promises (and is under no obligation to deliver). Workers starting out today would do better with a passbook savings account. As with any pyramid scheme, the founders and early participants come out ahead, and everyone following them gets shafted.
  

Every plan for reforming Social Security that I've seen has been voluntary. If you don't think you have the ability to manage your own money, you would be free to continue to fling it into the current Ponzi scheme. But those of us who do understand basic concepts of math and economics shouldn't have to suffer because of your fears.

Re:Oh goodie

[JordanH]

• Let's put all of our Social Security money into the stock market. The private sector could make much better use of that money than the nasty old government . . .

Over any long period, the stock market outperforms cash, which is the option you have with not investing Social Security money.

If you invest, there is risk, yes, but there is also reward.

We pretty much know what happens if you just run a Social Security Trust Fund. It's just a big pyramid scheme where the future payees have to pay out all the benefits. It depends on either enslaving the young to pay for pensions or decreasing benefits to sub-poverty levels. There's really no other option.

Besides, it's just a huge strawman anyway. I've heard no proposal that puts all the Social Security money into the market, just sensible plans to move a percentage of the money currently going into the rathole Trust Fund into markets, where it can stimulate the economy.

Re:Oh goodie

[jcr]

Yeah, much better to keep all the retirement money in the hands of one entity so that when it fails, *everyone* is hosed.

-jcr

Re:Oh goodie

[Anonymous Coward]

Well if the united states government fails i think you'll have bigger problems than losing some investments.

Oh right governments are evil and anarchy rulz0rz.

Ya those people in afghanistan have done well investing their income in the private market...

oh wait you mean in anarchy the guy with the tanks and the rockets launchers gets all the money and you die? doh, crap i guess marylin mason was wrong!

Re:Oh goodie

[Anonymous Coward]

Most of us would be worthless... Machines/Computers/3rd world people will replace all of us.

Re:Oh goodie

[bob1000]

I don't know about your personal savings but I plan to save more than 3 years for my retirement. Even the 5 year average on S&P 500 is still positive... Investing in a balanced fund (combo of stocks and bonds) would have done even better and run circles around social security.

These problems we see with enron, worldcom, etc.. are the natural shakeout of this new economy BS.. Like when CmdrTaco made $7 million from selling slashdot and god knows how much more from the lnux merger. I'm guessing the market will slide even more after all these frauds are exposed but the economy is still growing and you would have to be a fool not to include some stocks in your long term savings plan.

Re:Oh goodie

[Zeinfeld]

You have no money "invested" in Social Security. There is no account with your name on it (nor is there any "trust fund"), and you have no legal claim to any benefits whatsoever

This is untrue, there is an actual filling cabinet that holds the actual US Treasury bonds that are owned by the trust fund.

The accounting records kept by Social Security are no less real than those held by your bank. The only differences between Social Security and a real pension fund is that Social Security is only allowed to invest in the investment that gives the lowest return and the pension fund owners regularly borrow against the reserve.

That does not matter a whole lot because however 'insolvent' the trust fund might appear to become the US govt has plenty of discretionary spending to cut and can increase taxes if required.

The point of social security is not that it should be your only pension plan, it is simply a minimum pension plan that everyone is required to take out to make sure that the government does not end up with a large population of geriatric electors with no income who would inevitably vote themselves state aid.

Re:Oh goodie

[maxume]

ss == state aid.....

Re:Oh goodie

[EastCoastSurfer]

This is untrue, there is an actual filling cabinet that holds the actual US Treasury bonds that are owned by the trust fund.

Um, no. SS is simply a money *tranfer* plan. Take money from the young working bunch and transfer it to the old not working bunch. This has only worked because there have been more young working people than old people. The problem that is coming is that all of the babyboomers are going to be reaching retirement age soon and with the expected life expectancy going higher and higher there will not be enough young working people to support them all.

Re:Oh goodie

[Sloppy]

That's still better than the current system. Buy Worldcom, lose 80% of your money. Buy into pyramid scheme, lose 100% (or possibly even more than 100% -- yes, it's possible).

Re:Oh goodie

[BeBoxer]

If you don't think you have the ability to manage your own money, you would be free to continue to fling it into the current Ponzi scheme

I'm confused. Is Social Security a Ponzi scheme? Or is the stock market? While SS in many ways resembles a Ponzi scheme, it's been a remarkably sustainable one. On the other hand, hindsight has revealed that many Internet stocks not only resembled Ponzi schemes, but collapsed in short term screwing all but the early investors exactly as a Ponzi scheme should. If it walks like a duck, and quacks like a duck, it's a duck. If it promises huge returns, relies on an unsustainable number of new investors, and screws everyone but the top level, it's a Ponzi scheme. Good old fashioned Blue Chip stocks are fairly reliable. But a lot of the crap that the stock market has gotten away with over the last five years is just plain fraud.

Re:Oh goodie

[Anonymous Coward]

Any young person who thinks Socialist Security is going to still be there by the time they retire is crazy.

Re:Oh goodie

[peccary]

Over any long period, the stock market more or less tracks the growth in the GNP. Tax revenues track the growth in the GDP. In either case, they can't outperform some broad measure of economic growth over the long run.

To believe otherwise is a fantasy.

Re:Oh goodie

[oldperson]

Over any long period, the stock market outperforms cash, which is the option you have with not investing Social Security money.

That's not true for periods significant to human lives. During the bear market of the 70's, the stock indices fell year-to-year for 10 out of 12 years. Anyone who had invested money in the stock market in proportion to the indices near the beginning of the 70's had less net worth, ignoring inflation, than they started with until the mid-to-late 80's. Inflation was extreme during the 70's and real value was lost for even longer taking inflation into account. (Interest rates were also high and bonds held until maturity did well.) This drop in investment value had a measurable effect on retirees.

Yes, if you take really, really long periods you can overcome the 1929 crash, the 70's bear market and the .com collapse, but 20 year loss cycles are long enough that age and retirement force people to eat the capital losses in order to use their money before they die and people who suffer market downturns at the wrong point in their lives are never going to recover the loss.

As for the nonsense about putting small percentages of social security into the market, the brokerage and accounting costs are crippling and simply don't work. The mainstream brokerage where I have my retirement plans charges a fee to maintain accounts under $10,000. I'm well over that amount, but I'm pretty far along in my career. My first jobs paid minimum wage and the total sum of social security taxes collected while I was working myself through college was far less than the accounting costs of maintaining those small sums in any kind of market account. My first jobs out of college didn't pay well and accounting costs for market accounts would have been excessive for those years as well. People's incomes rise as they age (in general) and the accounts would grow from accumulated contributions so market accounts are more feasible for older people, but older people are the most exposed to adverse effects from market downturns.

Social Security has incredibly low overhead (from memory 0.5%? 0.2%?) and can feasibly handle the small accounts people in their teens and twenties are going to have. Private brokerages do not want this business. Privatizing social security is poular among idealogues who don't understand the costs and the small number of people with very high incomes. It doesn't work to the benefit of young workers or low income workers or most middle income workers wouldn't benefit until later in their careers.

Re:Oh goodie

[nelsonal]

That's because when social security was started, people paid in for their whole life and died quickly after retiring. Now we are living longer, and collecting more and the balance is shifting away from a surplus. I don't understand why more young people don't support Social security privitization. Its not like it just gets put into the market, you would get an account to manage, and if you wanted to leave it in what its currently in, just buy government bonds.
Yes there has been quite a bit of fraud in the market lately but how many companies are there that have had fraudulent data in their financial statements, not just aggressive, but actual fruad. I can recal about 10 from the post bubble period, but remember there are more than 6,000 companies, most of them are fairly honest about their performance, but they don't make the front page of the paper.

Re:Oh goodie

[sunspot42]

And middle income workers would only benefit later in their careers if the markets are doing reasonably well at that time. If their late careers are spent during a period like the 1970's or - heaven forbid - the great depression, they could be wiped out. The whole point of Social Security is to have a social safety net in place for the disabled and the retired that can't be obliterated by a market crash or made worthless by a prolonged market downturn.

But please don't confuse the 12-year-old libertarian geniuses with any facts. You might cramp their dogma.

Re:Oh goodie

[sunspot42]

Um, no. The Social Security trust fund actually owns bonds, whose rate of return has outstripped that of the stock market over certain extended periods of time (for example, during most of the 1970's), especially when you account for inflation, brokerage fees, etc. If the system is in danger of being overwhelmed by a wave of boomer retirees - which is doubtful, as those retirees will need to be replaced in the workforce by either imported or domestic labor which will therefore be paying increased premiums into the trust fund - the government could either borrow the money it needs to cover the shortfall, cut discretionary spending to cover the shortfall, increase the retirement age by 2 - 5 years (practical, given the increase in lifespan, but possibly politically loaded), institute means testing, or some combination of the above.

You're also assuming the boomers will be able to retire. Given the level of savings in this country, and the destruction of corporate pension funds over the past decade and a half, I suspect many of them will never be able to completely retire, and will spend their advanced years continuing to work until they are completely physically disabled, paying into the tax system without withdrawing anything from Social Security until they reach 70 and max out their benefits (assuming the government continues to offer a bonus for delaying benefits, which they probably will - in fact, they'll probably increase it to help spread out the wave of retirees).

Re:Oh goodie

[z_gringo]

Yes, Social Security is a Ponzi Scheme. If it were created by anyone other than the U.S. Government, it would be illegal.

Re:Oh goodie

[jareds]

The Social Security trust fund actually owns bonds, whose rate of return has outstripped that of the stock market over certain extended periods of time (for example, during most of the 1970's), especially when you account for inflation, brokerage fees, etc.

But the bonds in question don't earn money by being invested in anything. They're issued by the government to itself and it simply pays their interest out of general tax revenues. Clearly, the government can give itself bonds that earn any interest rate whatsoever; this does not impress me. Loaning itself money is functionally different from investing it in something. It simply amounts to an accounting gimmick to cause part of the cost of Social Security to show up under "interest payments on the national debt" or something like that.

Re:Oh goodie

[jareds]

And middle income workers would only benefit later in their careers if the markets are doing reasonably well at that time. If their late careers are spent during a period like the 1970's or - heaven forbid - the great depression, they could be wiped out.

Of course, one could shift an increasing proportion of one's assets into safer investments the closer one gets to retirement.

Re:Oh goodie

[EastCoastSurfer]

Here is a explains exactly how the *transfer* system works. So yes the SS system does buy T-Bills with any excess money, but if you think about it that is just a way to transfer any left over cash to the general government budget.

Re:Oh goodie

[SubtleNuance]

It depends on either enslaving the young to pay for pensions or decreasing benefits to sub-poverty levels. There's really no other option.

How about an Estate Tax that withdraws the 'fat' that the previous generation didnt pay in Taxes (and SocialSecurity Benefits(as they should have, or they should have properly prepared for their OWN retirement)).

Re:Oh goodie

[JordanH]

• Yes, if you take really, really long periods you can overcome the 1929 crash, the 70's bear market and the .com collapse, but 20 year loss cycles are long enough that age and retirement force people to eat the capital losses in order to use their money before they die and people who suffer market downturns at the wrong point in their lives are never going to recover the loss.

Sure, 20 year cycles are sometimes flat, but you're supposed to invest for retirement for 35 to 40 years. You aren't supposed to be in equities heavily just 10 to 12 years before retirement.

Tell you what, chart out 30 years invested in the Stock Market followed by 10-15 years (many are retiring at 70 or beyond by choice these days) and see how well you do.

The 10-12 period of the 70s was the worst you could show, and private investing still wins, big time, over the periods that you should be saving for retirement. If long term investing didn't provide for retirement, then the economy would be contracting, bad, for a long time and the Social Security scheme would be even more untenable. In such a scenario, the people who would be paying in to Social Security would be at or below subsistence themselves.

• Social Security has incredibly low overhead (from memory 0.5%? 0.2%?) and can feasibly handle the small accounts people in their teens and twenties are going to have. Private brokerages do not want this business.

Your thinking is one-dimensional here. Don't think typical brokerage accounts, think group pension funds or bonds for the very small amounts, converting to more aggressive instruments when larger amounts become available. If these were widely available, these would have low overheads as well.

The fact is that almost anything outperforms the silly cash-in/cash-out scheme we have now.

By mandating that some small % of monies now going into Social Security be put to work, we're just codifying good long term practices that people should be following. The fact that current avenues for investing small amounts are inappropriate for these monies is an opportunity for the creation of new instruments that could handle them well.

Re:Oh goodie

[JordanH]

I don't hear any proposals to eliminate Social Security. The safety net will be in place under all serious proposals.

The current "privatization" proposals mandate some small percentage of what currently goes into the "Social Security Trust Fund" to private investing.

This would just be mandating what all credible financial advisers recommend as good retirement planning.

I would be in favor of increasing the Social Security Tax to allow for this percentage as an additional savings. Of course, the Democrats who need to demagogue this issue wouldn't consider any sensible proposals in this regard.

Re:Oh goodie

[TheSync]

This has only worked because there have been more young working people than old people. The problem that is coming is that all of the babyboomers are going to be reaching retirement age soon and with the expected life expectancy going higher and higher there will not be enough young working people to support them all.

Right, please check out Social Security Privatization. Of course, you don't want to be in stocks for the 10-15 years before you retire!

Re:Oh goodie

[sphealey]

I'm confused. Is Social Security a Ponzi scheme? Or is the stock market? While SS in many ways resembles a Ponzi scheme, it's been a remarkably sustainable one.

Some of both.

First of all, while you don't have a SocSec "account" in the same sense you have a stockbroker account, the SSA has been doing its best to hide that by sending out "account statements" every 5 years (just got my last one a few days ago). So they would like you to think that you have an ownership account, anyway.

Second, SocSec has been sustainable because the population and average wealth of the United States have been growing continuously since it was created (1935 or thereabouts). As we saw with Enron, as long as the wealth is rising, you can pay for anything. However, starting around 2020 or so those trends will reverse (unless we import, I mean allow to immigrate, a lot of teenagers between 2010 and 2020), the average age of the US population will start going up, and whether or not the total wealth continues to increase the growth to support SocSec will no longer exist. Again the results of this can be observed in Enron. Too bad for me ;-(

Finally, due to the baby boomers hitting their peak earning years, SSA is currently running a surplus. They have to put that money somewhere, so they buy US Treasury bonds. Sort of like you running out of money in your checking account and floating yourself a loan from your savings account. Net increase in value: zero. So when it comes time to redeem those bonds in 2025, I wouldn't expect that wealth to be there anywhere!

sPh

Re:Oh goodie

[Rev Snow]

That does not matter a whole lot because however 'insolvent' the trust fund might appear to become the US govt has plenty of discretionary spending to cut and can increase taxes if required.

Take another look at the chart on p. 60 of the 1040 instructions from the IRS. Note that Social Security spending is 33% of federal spending today before the Boomers retire. That will only grow. Net interest on debt cannot be tapped, and all other categories are dwarfed by entitlement spending. There simply is not ``plenty of discretionary spending'' to re-assign to save SS.

I also have to ask if you have any clue just how enormous the unfunded liability of our entitlement programs is -- $20 Trillion. We aren't going to come up with that shortfall by saving dimes and pennies on other programs. The orders of magnitude simply do not compare.

Re:Oh goodie

[Zeinfeld]

That will only grow. Net interest on debt cannot be tapped, and all other categories are dwarfed by entitlement spending. There simply is not ``plenty of discretionary spending'' to re-assign to save SS.

The administration is currently pushing to make the repeal of estate taxes permanent - which will cost $10bn a year.

The US spends more on 'defense' than the rest of the world combined. Much of the expenditure has no connection to defense at all, it is simply a convenient place to put pork where it is least likely to be objected to. And of the actual military spending there is plenty of waste that can be cut, that the Pentagon is actually asking to be allowed to cut, military bases whose sole purpose is putting money into a local economy, weapons systems that the chiefs of staff dont want - Osprey, Crusader, etc.

Of course there are a lot of vested interests who want to scare people into letting them privatise their pensions. Only thing is that the people trying to scare them are the same crooks who ran WorldCom and Enron.

Re:Oh goodie

[ejasons]

You state:

You have no money "invested" in Social Security. There is no account with your name on it (nor is there any "trust fund"), and you have no legal claim to any benefits whatsoever.

then:

Every plan for reforming Social Security that I've seen has been voluntary. If you don't think you have the ability to manage your own money, you would be free to continue to fling it into the current Ponzi scheme. But those of us who do understand basic concepts of math and economics shouldn't have to suffer because of your fears.

So, which is it? Do I have my own money in Social Security that I should be able to invest in the stock market, or do I not?

Re:Oh goodie

[JordanH]

• Over any long period, the stock market more or less tracks the growth in the GNP. Tax revenues track the growth in the GDP. In either case, they can't outperform some broad measure of economic growth over the long run.

Which is more prudent, to depend on some future economy to be able to support you in your retirement, or to invest a portion of what you earn along the way for retirement?

The pay as you go plan is actually less reliable in that it depends upon the future economy and the Government's ability to borrow against the future to pay out pensions.

Then, there's the political reality that future generations may cut back pensions if they are feeling squeezed themselves.

Of course, present generations seem to think that our collective incomes and estates are all subject to taxes to support whatever fancy that strikes them at the moment. I don't see this trend changing at all, so maybe it doesn't matter. It might be more efficient if the Government just collected our wages directly and cut us checks based on what it is deemed fair.

Re:Oh goodie

[bnenning]

The US spends more on 'defense' than the rest of the world combined.

True, and much of it goes to defend the rest of the world. I'm all in favor of cutting defense spending where it makes sense (and there is undoubtedly billions in pork that should go), but that's irrelevant to the shell game of Social Security financing. If SS were backed by actual assets, there would be no need to discuss where to cut spending in order to fulfill its promises.

Of course there are a lot of vested interests who want to scare people into letting them privatise their pensions. Only thing is that the people trying to scare them are the same crooks who ran WorldCom and Enron.

I'm fairly certain I had no leadership position in Enron or WorldCom. And if I were a multi-millionaire, I wouldn't care much at all about any form of taxes; I could easily afford them. It's the regular people that are most harmed by having 15% of their income taken for FDR's vote-buying scheme, when they could do far better with even the most conservative investments.

You've yet to offer any argument as to why voluntary private accounts would be a bad thing. What are specific reasons why the current system is better, and what if anything do you propose to do about its increasing insolvency?

Re:Oh goodie

[bnenning]

While SS in many ways resembles a Ponzi scheme, it's been a remarkably sustainable one.

Yes, because it works on a much longer timescale than the typical pyramid scheme. It's only been 2-3 generations since it started, and it's already not sustaining itself; workers entering the system today are virtually certain to come out behind.

On the other hand, hindsight has revealed that many Internet stocks not only resembled Ponzi schemes, but collapsed in short term screwing all but the early investors exactly as a Ponzi scheme should.

Agreed, and they are not remotely representative of the stock market as a whole. Traditional stocks have fared far better; compare the Dow and S&P 500 to the Nasdaq.

Re:Oh goodie

[Zeinfeld]

You've yet to offer any argument as to why voluntary private accounts would be a bad thing. What are specific reasons why the current system is better, and what if anything do you propose to do about its increasing insolvency?

Everyone should have a private account invested in a growth investment. However everyone should also have a cash position.

The point is that you might be perfectly responsible investing for yourself but the majority are not. The point of social security is that no matter bow irresponsible the employees of Enron are with their 401K they still have a pension.

The problem with 100% private schemes is that if people invest unwisely they are inevitably going to force the government to bail them out.

The other problem is that the social security receipts are used to fund current social security spending and so if you give people private pension accounts you then have to find some way to pay existing retirees.

Under the GOP privatization plans Social Security would be insolvent ten years earlier than without.

Re:Oh goodie

[Rev Snow]

There simply is not ``plenty of discretionary spending'' to re-assign to save SS.

The administration is currently pushing to make the repeal of estate taxes permanent - which will cost $10bn a year.

The US spends more on 'defense' than the rest of the world combined. ...

Oh for goodness sake... I'd expect a response like that at CNN or on talk radio, but this is Slashdot. /. readers are not supposed to be that innumerate. Did you even follow the links I provided? Your basic points are reasonable, but completely beside the point.

Let's say you shut down the defense department completely. Congratulations! You've just paid one-half of this year's Social Security Bill. And don't forget to look at how the two programs are growing. In 1998, SS was 22% of spending; now it is 33% of spending, and the total budget has grown! Defense has gone from 16% to 17% over the same time period. And that's before you even consider that national defense is a constitutional duty of the federal government. The primary purpose of the federal government is rapidly becoming the suctioning of $$$ out of the pockets of workers (no matter how able to pay!! Payroll taxes are regressive!) and into the pockets of the retired (no matter how much they need it.). Hardly the republic the patriots fought for.

I have no clue where you came up with $10B a year from estate taxes, but let's just assumt you are right. That tiny amount is completely beside the point -- lost in the noise. It will cover the SS deficit in 2014, when it will only be $8B short. It might help a bit in 2015 when SS is $22B short, but by the 2020s when the annual deficit will be in the 100s of B, it will be clear how pointless any $10B savings is.

The current SS program is simply unsustainable, and it must be reformed. The only way to get the magnitude of $$$ required to "save Social Security" is through reforms of SS itself. Private accounts are not the whole solution, and done badly they could be a total disaster. You are right to be skeptical about them. But any view that the current system can survive without radical reform is based on fantasy.

The big question...

[kitzilla]

...did Martha Stewart sell her stock in time?

Re:The big question...

[Anonymous Coward]

martha steward...naked and petrified

Re:The big question...

[Anonymous Coward]

This is one of the most intelligent jokes I've seen on slashdot. Bravo. Interestingly yet, I wonder whether she knew her own stock would go down because of the scandal and short selled her stock in her own company.

Re:The big question...

[Pulzar]

You can't short sell a stock that you already hold in large quantities, by definition. You are just plain old selling, in that case.

Re:The big question...

[EastCoastSurfer]

It's called hedging.

Re:The big question...

[Pulzar]

It's not. It's called selling.

It would be called hedging if you bought some puts on the stock, or sold some covered calls. Or shorted another stock in the same market. Or performed any other action along the same lines, that reduces your risk.

Selling the stock that you own is just that, selling.

Thank Goodness

[Sergeant Beavis]

I got out of the Stock Market in 2000.

People that cheat thousands of everyday people out of money that they invest in their 401k, IRA, or other investment vehicle should get life at hard labor. It is high time the Federal Government tightened up corporate law and DRASTICALLY increased penalties for offenders. No Club Fed for this guy or Ken Lay and his Enron cronies. No, they need to spend their lives in Lousisana's Angola Prison where deer and Aligators play and everyone stands upright in the shower.

Re:Thank Goodness

[Usquebaugh]

Uhh we have a crook in the oval office and you want the goverment to tighten up the very laws they've just relaxed. Which presidential candidate do you think used Enrons corporate jet for campaigning?

I see the seeds of a revolution lets just hope it's bloodless.

Re:Thank Goodness

[Anonymous Coward]

Oh yeah that's a post that should be moded up. Give me a freaking break. Because Bernie and Co are a bunch of crooks, now our Prez is one too. You are an idiot.

Re:Thank Goodness

[e40]

No, you are an idiot. Watch the Frontline special on this very topic. Just came out this week. The Republicans are head of the class when it comes to letting Big Business police themselves.

Re:Thank Goodness

[Anonymous Coward]

Bush may not be a crook but he's almost certainly a criminal. He was arrested for drink driving when younger, and according to Michael Moore, was arrested a couple of other times for other antics when at university.

Accounting and Truth

[smoondog]

When are our corporate leaders going to put away greed in favor of fiscal responsibility? They are overpaid, over-valued and over-hyped. I can't believe that some execs make and own large percentages of the entire company, causing the stock price of the silent masses to be controlled by the actions of these idiot few. These guys even take loans for themselves ($366 million for ex-worldcom ceo)!

-Sean

Re:Accounting and Truth

[Anonymous Coward]

"
When are our corporate leaders going to put away greed in favor of fiscal responsibility?
"
Ha. you're funny. CEO's don't get to be CEO's by playing by the rules. They lie, cheat, steal, and kill to get their extra nickles.

Re:Accounting and Truth

[ftobin]

When are our corporate leaders going to put away greed in favor of fiscal responsibility?

You ask a question

They are overpaid, over-valued and over-hyped.

and then you answer it. Clearly, why stop when they're doing so well?

Re:Accounting and Truth

[Idou]

When are our corporate leaders going to put away greed in favor of fiscal responsibility?

I suppose when they no longer have absolute control over the corporation's financial information. I mean, accounting has got to be the most behind the times profession there is. I can pay all my bills online and send money overseas with a click of a button, but when it comes to getting updated accounting information from the company I invested in, I have to wait 45 days for the 10Q to show up at www.sec.gov.

Why don't companies implement realtime, transparent accounting disclosure systems for their stock holders? "Disclosing such information in realtime would give our competition an advantage . . ." Or, maybe it would force management to be responsible for their actions and unable to cover up their incompetence. Why is it I only see headlines of billions being stolen by management instead of by competition that has insider information

Why does it take a month for the corporation to generate an income statement? "Accounting is a very complex profession and some transactions take extensive time to research the best way to record . . ." Can you say "accountant's full employment act?" If the corporation is using a material amount of money in "questionable" transactions that need to be researched a month before you know how to record it there is definitely something wrong here. 99% of the transactions should be straight forward and that is enough to give your investors a constant idea of where the company is.

Ironic I feel this poorly about the profession when I am studying to be a CPA . . .

Re:Accounting and Truth

[letxa2000]

Ironic I feel this poorly about the profession when I am studying to be a CPA . . .

Since I "studied" accounting as part of my "core" classes at the University, I've been of the firmest conviction that the Accounting professional exists solely for the purpose of sustaining its existence. Back when I took my first accounting class I came to the conclusion that accounting was a profession that exists principally to maintain its own existince. There is no other logical reason for the BS that accountants "have" to do.

First of all, accounting should be able to "account" for money. Perhaps it can, but they've made it (intentionally?) so complex that only other accountants can understand the accounting. That makes it hard for everyone else to hold the company accountable which is what the accountants were supposedly there to do to start with.

The complexity of accounting serves to perpetuate the need to hire accountants. If accounting was a simple as it could be there'd be no need for a team of accountants, much less CPA exams and the whole accounting industry.

The compexity of accounting also allows for all the scandals we are seeing to happen. The reason why companies (or CEOs/CFOs) can get away with this stuff to the point of bankrupting otherwise functional companies is because the accounting is so complex that no-one can untangle it.

Since I took those Accounting courses, I've always felt one thing was inevitable: Computers would and will replace accountants. I always thought it would happen simply because computers can do it faster and more accurately and, thus, cheaper. Accounting doesn't require intelligence, it's repetitive number crunching which computers do better than humans.

But as it turns out, accounting has existed for two reasons: 1) To maintain the existance of the accounting industry. 2) To allow corporate officers to steal money and hide it as long as possible. That being the case it is no wonder accountants haven't been replaced by computers--the computers wouldn't help the officers steal money.

In the end, the industry that is being destroyed here is the accounting industry. Enron, WorldCom... The scandal is that the accountants haven't kept the companies accountable.

Do we need more government regulation? No. Do we need more oversight of the "accounting industry?" Not really.

We need to replace the accounting industry with computers, pure and simple. Those computers, for public corporations, should provide daily or even hourly updates of the financial status of the corporation both to the government and to the public. That's all the oversight that is needed.

Re:Accounting and Truth

[Danse]

I've been of the firmest conviction that the Accounting professional exists solely for the purpose of sustaining its existence.

Kinda like lawyers. They get to make the laws, and then they get paid to fight about them because the rest of us have no freaking idea how to interpret all these laws.

Re:Accounting and Truth

[Anonymous Coward]

When it stops being so damn profitable!! I am amazed that Ken Lay hasn't been lynched yet. It just doesn't make sense. Put him an a dark alley with 10,000 Enron shareholders who lost everything and see how long he lasts. Why is he still breathing?

And the sliding scales of justice say...

[RollingThunder]

one slap on the wrist, and a fine of whatever pocket change you happen to have on you.

Re:And the sliding scales of justice say...

[0WaitState]

one slap on the wrist, and a fine of whatever pocket change you happen to have on you

The scary thing is how accurate this comment is--we've reached a state where if you're a major company insider, your best path financially is to loot the company of 20-100 million, and then spend a fraction of it on your legal defense/settlement.

Until crooked CEO/CFO/CoBs start doing major jail time, this is going to keep happening. And with a wholly owned Shrub in the White House and soft-money campaign contributions owning Congress, real securities reform with meaningful deterrent provisions just aren't very likely.

What's even more scary is that even with all the accounting scandals and insider rip-offs, the US stocks are still considered one of world's most legitimate. Me? I'm going to invest my money in beer--at least the empties will be worth something.

Re:And the sliding scales of justice say...

[s.fontinalis]

What's frightening is if you'd invested $3,000 in say, Worldcom, at it's peak or you'd invested $3,000 in beer - the beer would have been a better investment(the deposit).

Re:And the sliding scales of justice say...

[Anonymous Coward]

...and for those that think otherwise, I point to the recent event where a certain monster software corporation yanked a large penis out of its pants and waggled it at the states saying, "I got something for those big mouths of yours."

Re:And the sliding scales of justice say...

[Jeppe Salvesen]

This is not going to stop until you clean up your justice system. I mean both in your courts and in your heads.

First off, let go off the revenge idea. The punishment should be punitive, in terms of making committing crimes a bad idea, not getting even. You never get even. Seeing the guy that raped your daughter being fried in the chair, will not bring your daughter back. For those people, I wish for them to live long lives in prison, tormented by regrets - alternatively with some hope if they have been wrongfully been found guilty.

Second, make it harder to sue someone. When you have people rushing into busses when they crash, to emerge later, holding their necks - well, you just have a big problem. Tort law has its perks, but you've let it go way too far.

Third, reduce the ability to compete by lawsuit. My impression is that a lot of companies use the court system for competititve purposes, suing their competitors as part of a larger strategy.

Fourth, put some regulations on severance packages and stock options. Those only encourage bad behavior. It is extremely dangerous to introduce badly thought out incentives anywhere, and giving a CEO an unconditional severance package is just folly. We'll see more of this, but I hope you'll learn some day.

I'm not an American, btw, but I studied there for three and a half years - 97 to 00. I'm actually Norwegian. Currently, the weak dollar looks to reduce the oil income that our social structures depend on substantially. So, your lack of control of your giant corporations is not only hurting yoruselves, but your allies as well. Not a good thing in these trying times..

Re:And the sliding scales of justice say...

[Anonymous Coward]

So which of the mutual funds will have the cojones and the lawyers to stand up for their investors, and sue the officers and directors (for dereliction of fiduciary duties, RICO, theft by trick, and other fun things)?

Oh wait, they're all on boards too...that conflict of interest thingie. Never mind!

Poor Stock

[MikeD83]

Their stock is definately in the toilet. Their own inverstor relation website is showing how poor of a company they are to invest in.

Re:Poor Stock

[Anml4ixoye]

For even more interesting views, check out this one

CEO Stock Options, Accounting.... (PBS Frontline)

[D_Nebuchadnezzar]

This is just another example of the real trouble American companies are in. On PBS the other night, Frontline divoted a whole hour to the extreme mess than the accounting/stock/ceo situation is in... Basically, Stock options aren't reported. CEO gets huge stock options. CEO lies about company's value. Accountants lie for value too, as they have consulting contracts with the company. Truth is found out, company's stock plunges, accounting company shreds paper... pays off politicians to keep things status-quoe... cycle starts over again. Very scarry.

Golf Course Prison for him

[Anonymous Coward]

Jon Stewart of the Daily Show on Comedy Central sums it up best. These criminals are not going to hard labor prison, they are going to golf course, luxury prisons. The funny suggestion by Jon is to put them in a cell with somebody who is in jail for like life for writing a $100 hot check. Also make sure that Bubba is extra lovey-dovey.

Ack

[Anonymous Coward]

That'll teach me to speculate in telecom. Not just fraud, massive fraud. Live and learn. Anyway this track with and article I just read saying that experts estimate they'll be another 6 or so big frauds exposed before things settle down

Why do I assume something else is up?

[Anonymous Coward]

I've been so hammered with conspiracy theories, before I read the freakin' article I do a google search for Scott Sullivan and Scientology.

I need a break.

Flame away!

Re:Why do I assume something else is up?

[Anonymous Coward]

No, if Scientology were behind this they would have made sure a non-scientologist took the fall.

Also Scientology is pretty bad at keeping a low profile. They always have to blow their cover by trying to recruit from inside whatever companies they gain influence in.

What about the other bean counters?

[Anonymous Coward]

Surely they knew that lumping so much cruft in as "capital equipment" is Not How Things Are Done.

There must have been Lots of worrying about this around the accounting offices, no?

Two year chart

[anthony_dipierro]

LNUX vs. WCOM

Re:Two year chart

[Anonymous Coward]

The best part is that VA is worth more than Worldcom is now. HA!

I've always wondered how companies that were once big and proud like MCI/Worldcom fuck up and end up bankrupt. MCI controls a large portion of the telecom market in the US and does incredibly well for years and years. And then all of a sudden their stock literaly takes a nose dive and the company goes out of business. It seems to happen all the time, even happens to companies that have almost no competition in their market and basically have captive audiences. How does this kinda stuff happen?

Re:Two year chart

[Anonymous Coward]

>> " The best part is that VA is worth more than Worldcom is now. HA!"

That's great, but don't expect VA to make through the end of the year. At least worldcom actually has stuff, like capital and buildings and stuff. Only thing $lasdhot has is a couple of linux servers in TACO's garage.

Re:Two year chart

[DrSbaitso]

well, worldcom's market cap is still a factor of 10 higher than va's, becaues there are a lot more shares of wcom outstanding.

Re:Two year chart

[Anonymous Coward]

One word: Fraud.

Just look at how the Rigas family ran Adelphia into the ground by pocketing the profits.

Re:CEO Stock Options, Accounting.... (PBS Frontlin

[Anonymous Coward]

If you don't like it move to Fidel's island paradise, ya communist! GREED IS GOOD!

here's it's chart in after hours trading...

[night_flyer]

when I checked stocks were .20 a share, down 78%

Yahoo Real-time Mkt

Re:here's it's chart in after hours trading...

[Anonymous Coward]

Oh, good it's cheap. Isn't this when we're supposed to buy?

Re:here's it's chart in after hours trading...

[linzeal]

Once it gets down to .0000000000001 cents a share its all mine !!! Hostile takeover !!! I'll make the entire board custodians in my private geriatric monkey zoo !!!

Re:here's it's chart in after hours trading...

[Anonymous Coward]

Time to start buying now, before the news gets out that someone made a calculation error and the $3.6 billion were actually $360 thousand.

Re:here's it's chart in after hours trading...

[Anonymous Coward]

You seem to have forgotten the "8." in front of "78%".

Re:here's it's chart in after hours trading...

[buckeyeguy]

Trading in WCOM and MCIT has been halted by NASDAQ... not unusual for this sort of debacle. They may stay halted for some time. Last trades I saw were for $0.10 on Island, $0.09 on Instinet. Ouch.

Re:here's it's chart in after hours trading...

[igorxa]

actually, the nasdaq halted trading this morning on worldcom and mci stock. see here. so current prices are $.83 for worldcom, down $.08, and $1.68 for mci, down $.13. and why is it now that everyone's recommending bankruptcy? shouldn't they have thought about that earlier?

Re:here's it's chart in after hours trading...

[zytheran]

How come there is a spike , by a factor of 10, of shares traded in the last minutes on Monday? I wonder who was selling out before the bubble burst later in the week?

Re:here's it's chart in after hours trading...

[Compuser]

You really want all that debt on your shoulders?

Re:here's it's chart in after hours trading...

[linzeal]

Don't I get at least a 20 million dollar golden parachute for being a good sport like every other executive when it goes under?

Enron, WorldCom are just the start

[WIAKywbfatw]

If the reports about WorldCom are accurate then this is Enron all over again.

In today's economic environment, accountancy practices are under closer scrutiny than ever before - and not before time. The only reason why Enron were able to get away with fraud and misrepresentation on such a grand scale was because everyone - the accountants, the analysts, and the investors - had their eyes closed to the obvious.

Hindsight is 20/20, but even an idiot could tell you that, in an era where companies lie about just about everything, anything said by a CEO, issued by a press officer or printed in an annual report should be taken with a very large pinch of salt.

Post-Enron, the markets are very jittery, and many investors have lost faith entirely - if a seemingly sure-fire, blue-chip company like Enron can fall then anyone can. Freefall is an exaggeration, but compare how quickly the markets bounced back from September 11 to how badly they've reacted to the ongoing crisis of faith sparked off by the Enron/Andersen fiasco.

Witness how even the slightest sign of weakness is being jumped upon by analysts. Profits warnings and other negative indicators that would have shrugged off just twelve months ago are now being forensically examined by paranoid dealers anxious not to get caught out a second time.

One things for sure: there are a few more timebombs ticking away out there. Enron may have been just the first of many.

The bottom line is this: it's going to be some time until the markets recover and it's going to be longer still until we see the kind of market gains that we experienced in the 80's and 90's.

Re:Enron, WorldCom are just the start

[Anonymous Coward]

The market dropped after 9/11 because people seek liquidity after a disaster. This is why the Fed immediately made an announcement about currency availability from the central bank. Once people calm down from the disaster, it's pretty easy to undo the liquidity conversion. Declining market faith is always going to have a more sustained drop because although people seek liquidity at a slower pace, they're not as likely to undo the conversion immediately.

Re:Enron, WorldCom are just the start

[Anonymous Coward]

Any real investor who only goes by the annual reports is _not_ an invester. They are day traders, and accordingly should loose their asses when things like this happen.

If anyone would actually do any research past what the SEC makes the companies hand out to its investors, it would have been aparent about two months ago that there was something going wrong here.

Never trust what is being spoon fed to you. Especially when you are old enough to feed yourself.

Re: Enron, WorldCom are just the start

[Black Parrot]

> One things for sure: there are a few more timebombs ticking away out there. Enron may have been just the first of many.

After following the news, watching the PBS special, and reflecting on human nature, I've come to the conclusion that this is the norm rather than the exception.

Our whole economy (and indeed, most of our government) is focused on keeping share prices high at all costs. For companies, this means optimize the quarterly report at all costs. (Or even more frequently than quarterly, for an increasing number of companies.) So they are re-wiring themselves to be all marketing on the front side and all creative bookkeeping on the back, with a big gaping hole in the middle where the genuine power of the economy lies^w used to lie.

This does not bode well for the long-term health of our economy. The metaphor "house of cards" comes to mind.

Re:Enron, WorldCom are just the start

[Jon Howard]

When Microsoft is officially declared to be the cyber-arm of the Bush's country, their DRM technology will be deployed everywhere and all businesses will be directly audited by government oversight.

Is this not the plan?

Re:Enron, WorldCom are just the start

[Sloppy]

The bottom line is this: it's going to be some time until the markets recover and it's going to be longer still until we see the kind of market gains that we experienced in the 80's and 90's.

Or maybe we'll find out that there weren't any big market gains in the 90s.

Re:Enron, WorldCom are just the start

[Prior Restraint]

...if a seemingly sure-fire, blue-chip company like Enron...

Technically speaking, Enron is not a Blue Chip company. That term is reserved for the thirty companies which make up the Dow Jones Industrial Average.

Pedantic, I know, but it's what I do best.

Re:Enron, WorldCom are just the start

[Anonymous Coward]

The sad part is that I doubt most investors even read the reports filed with the SEC.

Re:Enron, WorldCom are just the start

[Jeppe Salvesen]

No wonder the market is jittery. They know too well how over-the-edge the past 5 years have been.

So, did we ever learn anything from the 80s? 20s? Can you all say no? The stock markets are all feeling, with a tad of analysis thrown in for good measure. There is little rationality there, just all poor leadership. That is part of the reason why the dot-com was allowed to happen, and that is why they are overreacting when one large company has fucked up (unless I am right in paragraph one).

The stock markets are all mass hysteria. We should be very worried that they have such impact on our lives.

Re:Enron, WorldCom are just the start

[Cally]

> everyone - the accountants, the analysts, and the
>investors - had their eyes closed to the obvious.

...unless you read NANOG-l, where the network engineers, architects and hackerish observers of the network industry have been saying for (literally) years "Bernie Ebbers is a crook, what a shame UU will probably go down in the wreck when it finally comes."

By all accounts (and from some personal experience as a customer) UUNet have a pretty solid, reliable, professionally run network. I just hope the receivers realise a lit network complete with engineering teams is worth a lot, lot more than a dark network with no engineers.

Re:Enron, WorldCom are just the start

[6e7a]

One thing I haven't seen mentioned here is that as the Internet bubble was bursting, many companies were likely motivated to move numbers around to make it look as if they were doing okay while they looked around for someone to buy the company. I think the stock market is mostly a game of musical chairs for grownups. The music stopped unexpectedly for Enron and WorldCom. Who's next?

$6 Billlion in fraud, actually.

[unicorn]

The $3.6 Billion, is how much the value of the company sank on the news, in after hours trading.

Re:$6 Billlion in fraud, actually.

[Monkeyman334]

+3 informative? I don't think so

June 25 -- WorldCom has uncovered what people close to the company describe as a massive fraud, inflating a common measure of its earnings by more than $3.8 billion over the last five quarters. The company late Tuesday confirmed its intention to restate its earnings and said it had notified the Securities and Exchange Commission.

6 billion seems to be what their earnings should be:
Without these transfers, the company's reported EBITDA (earnings before interest, taxes, depreciation and amortization) would be reduced to $6.339 billion for 2001

25 of 29 biggest telecom companies will go bye-bye

[CanadaDave]

I heard on the radio just last week...that there was a guy who worked at a New York investment research firm (they emphasized that he was NOT a broker/analyst), who said in a newspaper column (I think in the NYTimes) that 25 of the 29 largest telecom/photonics companies in the US were at risk of going bankrupt in the next coming months. He compared it to the early 20th century when there were over 50 car manufacturers in the US, and then after a major car industry meltdown, there were 5 companies which emerged from the dust.

This guy predicted that 25 of the largest telco companies will go down (and this 25 included Nortel, but that's the only name I remember), and NO ONE will rescue them at all, because the only way the other 4-5 companies will have a chance of a healthy life afterwards is if they let the companies go bankrupt (R.I.P.) while the 4-5 remaining companies will buy them up in a fire-sale.

Just wondering if anyone else heard about this prediction...it was just last week I think. I'd also like to get my hands on the article. If anyone knows anything about this, please let me know. I did a bit of Google searching and checked the NYTimes, but didn't find anything. Bad keywords probably.

Posibly death.

[zulux]

When you consider that an average person earns 2 million in his/her lifetime, this 'fraud' can be considered the 'murder' of 1500 lives worth of work.

Perhaps, death is an appropriate punishment.

Just food for thought.

He must be stoned

[CanadaDave]

What should the punishment be for these people? We can't really fine them for that amount. And you can't really put them in jail for any amount of time that really makes up for it. Nor can you ask the people who made money on the stock to give their money back to the people who lost money.

I think they should be "stoned" like they used to back in the days. I've always wanted to participate in a stoning. I always found it interesting that one stone doesn't really hurt that much, but as soon as you hit them with hundreds of stones, it really starts to hurt.

Are there any other suggestions?

Re:He must be stoned

[Anonymous Coward]

Just wait until Wahabist Islam takes over your country - you'll be able to participate in all the stonings you want. Until, of course, it's your turn to be the victim.

Re:He must be stoned

[Anonymous Coward]

Well if you oppose the droves of muslim immegrants pouring into your country you are a "racist right wing bastard" like pym fortuyn. Good thing one of those peaceful no-hate activists shot him dead in the street. No big loss, muslims know gays like pim deserve to die anyways so it was really just god's will...

Wouldn't hire me.....

[idiotnot]

I was "overqualified" to work for them. Sadly, there was a point where I was looking for something else to do. I wanted something that was basically brainless, mundane, paid okay, and provided decent benefits. I figured that although I'd hate it, I could be a decent telemarketer (I can speak, unlike 80% of normal telemarketers). I took their little employment test, did the interview, and was told that I wasn't the type of person they were looking for -- overqualified. I suppose, however, that if corporate management is going to be doing questionable things, they prefer to have mindless drones working for them. Fewer people to make mental notes.

Re:Wouldn't hire me.....

[Anonymous Coward]

Here's a clue Mr. Smartypants, when you apply for a job you know you'll be overqualified for, don't list your entire work history on your resume. Just enough to get you in. If your intelligent enough to scare them with your l33t skillZ, you should know not to in the first place.

I also highly doubt you would be turned down because you aced "the test". Because I did it myself and scored the highest they'd had in 2 years, they scooped me up and I still love my job here.

Were you sure to tell your mom how overqualified they said you were when you got home? ;)

Re:Wouldn't hire me.....

[idiotnot]

If your intelligent enough to scare them with your l33t skillZ, you should know not to in the first place.

IIRC, I didn't put any of my 133t zkillZ down, nor anything but my then current employer for my job history. I did put down things like my HS diploma, my major in college, and my current GPA.

BTW, in your statement, "your" is incorrect, it's "you're." But then, you've proved my point by a) admitting you were hired by worldcom, and b) posting as an AC to flame, and c).....

I could go on and on. Good riddance. Even though WorldCom is one of the largest employers in my area, I find myself rooting for the other guys. This latest news just confirms my suspicions....

Re:Wouldn't hire me.....

[Anonymous Coward]

I post as an AC because I've only ever had to post once before. Your comment just got me so riled up I had to again. My use of an apostrophe hardly is any measure of my intelligence (I'll admit I only had passing grades in English class).

I also don't believe WorldCom's going ANYWHERE. Unless you'd like to see the internet down tomorrow. Not to say that any number of things couldn't happen to it, but it will take some time, and I'll have more than enough to find another job.

Re:Wouldn't hire me.....

[Anonymous Coward]

...I'm a different Anonymous Coward to the one whose grammar you disaprove of. [ Yes, never end sentence on a preposition ]

Sometimes saying someone is "overqualified" is a nice way of saying you're not good enough but hey look he has a degree. So I wouldn't get too big-headed they could be insulting you more than you can ( from what you say above ) even imagine.

No it can't.

[SIGFPE]

this 'fraud' can be considered the 'murder' of 1500 lives worth of work

You can't murder work.

Re:No it can't.

[EverDense]

You can't murder work

But you CAN kill a few hours on SlashDot.

Re:No it can't.

[rodgerd]

No, but you can bet that amongst people burned by criminal fraud actions there are suicides, people unable to meet medical bills, people who lose their homes and suffer other fates that, had violence been involved, would merit stiff sanctions.

If I burn your house down, well, arson carries a stiff penalty. If you lose your house because I defraud you, I might get a small fine and a nice minimum security break. Boo-hoo.

Re:No it can't.

[SIGFPE]

If I burn your house down, well, arson carries a stiff penalty. If you lose your house because I defraud you, I might get a small fine and a nice minimum security break

But that, on the other hand, is a very valid point.

Thanks, Worldcom!

[Orangedog_on_crack]

I work for one of the telcos, fortunately not worldcom. But these clowns are going to bury the whole market. Between the former CEO and CFO, these fuck-witts have managed to further erode what little confidence the market had left in the sector, and most likely, the stock market and economy as a whole. I hate seeing the feds overstep their bounds, but they need to make an example out of these assholes. It needs to involve time in prison....and a lot of it...and I don't mean club fed, either, where their biggest worry is getting enough time on the driving range. No, I mean prison with Bubba and all of his sexually frustrated cell-mates. These guys deserve to someone's prison-bitch for the better part of a decade. Oh, and don't forget to conficate everything that these pricks own, so they actually have to go out and get a j-o-b when they are released.

Re:Thanks, Worldcom!

[s.fontinalis]

If you look at Bernie's finances - he's pretty close to owing more than he owes. And that was before WCOM stock/toilepaper was flushed.

Maybe they'll send him to jail in Mississippi?

Re:Thanks, Worldcom!

[Anonymous Coward]

...I mean prison with Bubba and all of his sexually frustrated cell-mates. These guys deserve to someone's prison-bitch for the better part of a decade.

Yeah, there's nothing funnier than rape. Oh, it's prison rape, so I guess it's okay.

Re:Thanks, Worldcom!

[Anonymous Coward]

It's practically a defacto part of sentences. Something to keep in mind the next time someone says society has advanced since the middle ages when we used to burn people at the stake. Those people don't realize that a minute or two of pain followed by death, isn't really the worst thing that can happen to a person. Death is nothing.

Re:Thanks, Worldcom!

[swylie]

I believe prison rape is cruel and unusual punishment. I wouldn't wish it on anyone. Rape isn't funny, so don't joke about it.

Re:Thanks, Worldcom!

[TheSync]

I work for one of the telcos, fortunately not worldcom. But these clowns are going to bury the whole market

Heh, you'll soon be able to buy a lot of fiber and routers on sale, cheap!

WRONG!

[Newer Guy]

It's the Government de-regulating all these companies that's the problem! These assholes feel like there's NO regulations now...so they can be as greedy as they want to be..and the hell with the 17,000 who are about to suffer because of their massive greed by losing their jobs.

Re:WRONG!

[CrazyDuke]

IMWO (In My Worthless Opinion) the government is a big corporation itself. Actually I think every large social organization is a honest threat to the freedoms of individuals, as the groups power increases when people are more amendable to its desires. Slaves are easier to control than those that are free.

Re:WRONG!

[Anonymous Coward]

It's the Government de-regulating all these companies that's the problem!

Bullshit. You think more government oversight is the solution to the problem? I'm all for the judicial system throwing the book at this crew so Wall Street learns respect for private property again...chiefly that of their investors. But building up the bureaucracy of the SEC is socialism. Let Wall Street clean its own house.

Re:WRONG!

[afxgrin]

man - if i had some extra mod points, i would have smacked your score up.

but instead, i'll just add you to my friends list.

Re:WRONG!

[e40]

I LOVE the way it's ALWAYS an AC that takes your point of view.

OK, let's start with Obvious Shit 101:

Corporate interests are not aligned with the people. For example, that chemical plant down the street from you would rather dump their toxic waste somewhere rather than dispose of it in a safe way. Why? Because it is more profitable for them to dump it. There are BILLIONS of examples of this type of stuff.

The government's role, among other things, is to protect the public from corporations. In this case, bullshit accounting has caused GREAT HARM to citizens of this country. Without RULES, corporations will continue to harm citizens and generally cause havoc. The current ecomonic downturn was made worse by Enron and others, and the responsibility for the creation of the Enron's rests squarely on the shoulders of our government. If you really want to know more, watch Bigger than Enron on PBS program. It explains how we got into our current state very well.

Re:WRONG!

[prisoner-of-enigma]

The government's role, among other things, is to protect the public from corporations.

Shockingly enough, I don't see that function enumerated ANYWHERE in the Constitution. I, of course, must be in error. Please, by all means, educate me as to where you found it stated that one of the government's roles is to "protect" us from corporations?

Fact is, anyone who cared to dig deeply enough could've found out that two and two don't usually equal five at WorldCom. The problem is, people are far too willing to give the corporate accountants the benefit of the doubt as long as the stock keeps performing. I'm quite sure -- no, DAMN sure -- that questionable accounting practices are the NORM, not the exception. Why? Don't try the tired old line that only the executives profit, because it's not always true. MILLIONS of people profited from Worldcom a few years ago, and I'm quite sure things were shady then as these things don't just develop overnight. Stockholders DEMAND meteoric, exponential, improbable growth from companies or they dump the stock and flee to someone else that will promise them the moon.

What I'm getting at is that every person who invests money anywhere is taking a risk. There are no guarantees in this world, and the stock market is worse than most. If you want guarantees, stick your money in a 2% checking account. Stocks are for folks who KNOW there's a risk involved. If you don't know it, or don't think about it, you have no business in securities and deserve to lose your shirt every now and then. I hope those responsible at Worldcom burn at the stake, but the last thing we need here is MORE government intervention. The market will naturally weed these companies out just as it is now doing.

Re:WRONG!

[e40]

Shockingly enough, I don't see that function enumerated ANYWHERE in the Constitution. I, of course, must be in error. Please, by all means, educate me as to where you found it stated that one of the government's roles is to "protect" us from corporations?

The constitution protects the people from the government. At the time it was written, big corporations, as such, did not exist.

I'm surprised that you would disagree with my original statement. There are lots of examples of the government protecting us. The EPA was created to make sure corporations do not pollute. In other words, the government protecting us and our land from people that would do us and it harm. The SEC, DOJ, police and numerous other government instituions and agencies are there to protect us. Sure, these organizations and agencies sometimes harm us, but the intent of their creation was to protect us.

Let's look at the SEC. If you watch the Frontline special on Enron, you will see the head of the SEC for many years saying that the government failed to protect us from rampant conflict of interest and the special interests of the CEOs. If they had been able to do their job, it is believed that Enron would never have been able to do what they did. Watch the program and judge for yourself. The problem is, congress, backed (or manipulated, depending on what you think of lobbyists) by the very CEO's that raped their investors, defanged the SEC.

Re:WRONG!

[snarfer]

Shockingly enough, I don't see that function enumerated ANYWHERE in the Constitution. I, of course, must be in error. Please, by all means, educate me as to where you found it stated that one of the government's roles is to "protect" us from corporations?

What do you think a corporation IS?! It is an invention of government (the people) that is supposed to benefit us (the people). We, the people, through our government, allow people to organize a business in a certain way TO SERVE THE COMMUNITY INTEREST.

What Republicans/corporatists are missing when they complain about "the government" is that the government is the PEOPLE. And there is red tape, because there has to be ACCOUNTABILITY. The red tape is OVERSIGHT. Corporations don't have accountability internally, they are autocratic and are not easily accountable to the people. SO they have to be REGULATED so they don't get out of control.

Re:WRONG!

[RandomPeon]

Shockingly enough, I don't see that function enumerated ANYWHERE in the Constitution.

Article 1:
Congress shall have the power... to regulate commerce with foreign nations, and among the several states, and with Indian tribes.

Commonly referred to as the Commerce Clause. You may wish to consider reading the Constitution, specifically Article 1, the enumerated powers. Seems like an enumerated power to me, unless you wnat to claim WorldCom or other publicly traded companies do not engage in interstate or international commerce?

Re:WRONG!

[prisoner-of-enigma]

I'm surprised that you would disagree with my original statement. There are lots of examples of the government protecting us. The EPA was created to make sure corporations do not pollute. In other words, the government protecting us and our land from people that would do us and it harm. The SEC, DOJ, police and numerous other government instituions and agencies are there to protect us. Sure, these organizations and agencies sometimes harm us, but the intent of their creation was to protect us.

Just because such organizations exist does not mean that they are valid uses of government. In fact, the framers of the Constitution gave the federal government very limited sets of powers specifically BECAUSE they wanted to protect people from something similar to the Monarchy they had recently escaped. Quite specifically, all powers not expressly given to the federal government were to be reserved for the States. This concept has been thrown on the trash bin by the big government types. While the EPA and other organizations MAY exists and MAY do an adequate job, they are not what the framers had in mind. What they had in mind was smaller, more local, less bureacratic organizations that were more "in tune" with their constituents, namely people living in that state. The federal government is just one example of how faceless and impersonal our government has become -- wasteful, too. If the Founding Fathers could speak today, they would be against it.

Re:WRONG!

[prisoner-of-enigma]

You may wish to re-read the post I was responding to, specifically their calling for governmental regulation in the areas of accounting practices and stock market oversight. Interpreting the Commerce Clause, which I am well aware of, in such a manner is a gross exaggeration of what was intended. The intention of the Commerce Clause was the negotiation of treaties and trade agreements between foreign nations, "the several states" which at that time were much more regional than our current monolithic governmental structure, and the Indian tribes which were more or less treated as foreign nationals.

You will note, as have many Constitutional scholars, that the Constitution seems to have been crafted at every possible turn to keep massive power OUT of the hands of the federal government, and wherever possible concentrate that power at the state, local, and individual levels. The framers were AFRAID of a large, centrally organized government, given that they'd recently thrown off the shackles of England.

Oversight such as that being discussed is already available through private organizations, and to a much greater extent by the private investor him/herself. Problems such as Enron and WorldCom are simply extreme examples, not commonly found and easily exposed once the hunt begins. These two companies are heralds of an increasing amount of introspection by investors into the companies they are investing in. No doubt every CEO of every Fortune 500 firm has been on the phone or in a meeting with their respective CFO's in the last few months, getting assurances that no funny business is going on. Those that haven't been doing so will eventually be found and burned at the stake...all without the government lifting a finger because private investors will DEMAND it.

Have faith that people and organizations can function, even thrive, without government playing nursemaid to every bump and bruise.

Re:WRONG!

[prisoner-of-enigma]

What do you think a corporation IS?! It is an invention of government (the people) that is supposed to benefit us (the people). We, the people, through our government, allow people to organize a business in a certain way TO SERVE THE COMMUNITY INTEREST.

You see, that's where you're wrong, snarfer -- in that last UPPERCASE comment. This whole "COMMUNITY INTEREST" thing sounds a great deal like something that Marx and Lenin would've loved. It's called Socialism, it's been tried, and it doesn't work.

There is no such thing as the community interest! Unless you have a community where all inhabitants are of the same mind, same tastes, same EVERYTHING, someone will ALWAYS see something as "not in the community interest". Mob rule (sometimes referred to as "Democracy) dictates that the minority will be squelched, their desires subsumed "for the greater good". Trouble is, who gets to determine what's for the greater good? You? Me? My aunt? The homeless guy on the street?

You can't play human nature that way. The one thing you CAN count on is that people will generally do what is in THEIR best interests so long as it isn't illegal and there aren't any social stigmas against it. This predictable behavior is the result of CAPITALISM, which may not be pretty all the time but does work and has created more wealth, enlightenment, and prosperity in this nation faster and better than anywhere else on Earth in all of history. It has happened WITHOUT the express involvement of government because it is REQUIRED to be so according to the principles of a free market economy. To propose otherwise would be to undermine the very system that has made you, me, and millions of others around the world prosperous.

Re:WRONG!

[RandomPeon]

Interpreting the Commerce Clause, which I am well aware of, in such a manner is a gross exaggeration of what was intended.

That's nice. The rest of us, including the Supreme Court, have been interperting this way for a few centuries.

The intention of the Commerce Clause was the negotiation of treaties and trade agreements between foreign nations, "the several states" which at that time were much more regional than our current monolithic governmental structure

The Constitution explicitly forbids states from entering into treaties or trade agreements with other states or nations. That can't be it. Maybe Congress was supposed to regulate national commerce, like capital markets.

No doubt every CEO of every Fortune 500 firm has been on the phone or in a meeting with their respective CFO's in the last few months, getting assurances that no funny business is going on.

Or they've been figuring out how to quickly raid the company before everybody finds out. Or how they obsfucate their finances longer without anybody finding out. The vast majority of their compensation is in stock options so they make more money by raising stock prices in the short term. Once their options vest, they lose nothing if the company goes bankrupt the next day. Sadly, many Fortune 500 companies are currently being managed as pump-and-dump schemes. Skilling and Lay set an example - sell while you still can.

Those that haven't been doing so will eventually be found and burned at the stake...all without the government lifting a finger because private investors will DEMAND it.

Enron's top 140 managers paid themselves more than $700 million immediate period preceding its descent into bankruptcy. If that's what constitutes a stake-burning today, sign me up.

Have faith that people and organizations can function, even thrive, without government playing nursemaid to every bump and bruise.

Characterizing billions of dollars of theft as a "bump and bruise" seems like a bit of an understatement. You're asking for a lot of faith. Reality seems to contradict it. I've met communists who are less utopian.

Re:WRONG!

[Anonymous Coward]

This concept has been thrown on the trash bin by the big government types.

Well, this process was already on the trash heap in 1791 when the First Bank of the US was formed. Now, you can say that Alexander Hamilton was a "big government type", but remember that Jefferson (after much biting of nails over his power to do so) bought the Louisiana Purchase, also using a power not enumerated in the Constitution. Hard to say Jefferson was a "big government type."

Re:WRONG!

[snarfer]

Well, at least you're up front about prefering corporate rule to democracy.

Re:WRONG!

[SubtleNuance]

This whole "COMMUNITY INTEREST" thing sounds a great deal like something that Marx and Lenin would've loved. It's called Socialism, it's been tried, and it doesn't work.

HA! We woke up this morning thinking that Worldcom wasnt a Great Big Lie and that Capitalism Worked -- tell that to the 17000 (and the rest (85000?)) when WC goes titsup.com) unemployed and the rest whose lives will be crushed by investments in WC.

Capitalism will prove to not work -- see Enron, WorldCom, Andersen, ??? -- then see Marx and Lenin ;)

Re:WRONG!

[SubtleNuance]

someone will ALWAYS see something as "not in the community interest". Mob rule (sometimes referred to as "Democracy) dictates that the minority will be squelched, their desires subsumed "for the greater good". Trouble is, who gets to determine what's for the greater good? You? Me? My aunt? The homeless guy on the street?

Economic policy does not a complete State make. Please take this survey to understand that economic policy and social policy are on different scales. It is completely possible (and my personal preference) to have incredible personal freedoms (the idea embodied in the Canadian Charter of Rights/Freedoms) and Democratically Controlled (influenced) Economies (socialism/communism).

wealth, enlightenment, and prosperity

With sufficiently narrow definitions of those terms you *may* be correct - some others (myself) feel America is a failure. Pollution, Poverty, Violence, Ignorance, Selfishness, Greed, Consumerism, Disenfranchisment, Inhuman would be some of the (off the top of my head) descriptions I would make of Today's USA.

Being told (by those who benefit) from the definition of success does not create it... this is a very big issue - America is an unsustainable mess, and history will certainly prove it a failure.

Re:WRONG!

[prisoner-of-enigma]

With sufficiently narrow definitions of those terms you *may* be correct - some others (myself) feel America is a failure. Pollution, Poverty, Violence, Ignorance, Selfishness, Greed, Consumerism, Disenfranchisment, Inhuman would be some of the (off the top of my head) descriptions I would make of Today's USA.

While I would agree with you that there are plenty of things in America that need fixing, declaring the entire system a failure is a bit premature. I prefer to believe that Capitalism will succeed primarily because it is most in line with typical human behavior. Allow me to digress for a moment.

Socialism depends on a human being working for the good of a group instead of for him/herself. While this is a neat idea and would seem to result in a harmonious society, it does not work well because people do not like to work for goals that do not benefit themselves in some way. We are just not that altruistic by nature. It would be nice if we were, but we're not, and the larger the group of people involved, the less likely it is to work. Sure, some nations have tried to MAKE it work, and you even mention Canada, but you will note that Canadians do not enjoy all the freedoms we have in the U.S. Their government has significant rights to crack down on individuals and actions that the government finds -- ahem -- not to their liking. Note one of their more recent decisions to ban viewing American television channels so that they can prop up their own ailing entertainment industry. Shades of Cuba, banning listening to Radio Free America...

Of course, here we don't, or shouldn't, have to put up with such things. Capitalism requires that the government by and large stay out of things and let us peons run things, but the system frequently gets sidetracked. Politicians are largely to blame. Don't blame the corporations, as they're just doing what comes naturally! Blame the politicians for being so money and power hungry that they will sell their vote. THIS is what is wrong with America, our loss of honor, that is causing our current ills. It's become quite socially acceptable to stab someone in the back as long as you can legally get away with it. In some cases, it's even been glorified. I blame our drifting sense of morals (whichever set, I'm not partial) and mass media for pushing a "just do it" kind of lifestyle.

The downside of Capitalism, as you have pointed out, is that it is not necessarily kind to everyone. That's fine with me. Nature herself is not kind to a species that cannot find a way to make itself propserous (in the natural sense of the word, not financial), why should our system of government be any different? Those who strive and succeed should be rewarded, those who languish and fail should not be compensated. To do the opposite would lessen the desire to excel and reward laziness and failure, just as it happened in the former Soviet Union. And if you want to talk about "Pollution, Poverty, Violence, Ignorance, Selfishness, Greed, Consumerism, Disenfranchisment, Inhuman", then you have only to look to some of the (formerly) largest Socialist nations on the planet. You'll find all of the above with the possible exception of "Consumerism", with a heavy emphasis on "Pollution" and "Inhuman" as well.

Re:WRONG!

[JimFromJersey]

Marx and Lenin already lost. They were to economics what LR Hubbard was to religon.

Re:WRONG!

[jafac]

I think you'll find it in the preamble;
". . . to (sic) establish JUSTICE (emphasis mine) and pure domestic tranquility, provide for common defense (against bad guys, foreign and domestic, terrorist or white-collar criminal), promote the GENERAL (emphasis mine) welfare (make everybody prosperous, not just a select few) and secure the blessings of liberty (freedom abused is freedom in decline) to ourselves and our posterity (borrowing money now and making our children pay it off is double-plus-ungood). . . "

Maybe not

[Sandlund]

Their accountant was...Arthur Andersen LLP. As Gomer Pile would say: surprise, surprise.

If it had been one of the other "Final Four" accouting firms, maybe it would have been the beginning of something huge. Expect a "what do you expect?" while they move on to the next scandal.

You mean CEO's aren't honest?

[MongooseCN]

So you're saying that after all the years of backstabbing coworkers, financial threatening, lying, politics, selling off grandma, etc to get to the top, CEO's don't suddenly become honest?

If morals meant profits, capitalism would be the garden of Eden.

Re:You mean CEO's aren't honest?

[mc6809e]

If morals meant profits, capitalism would be the garden of Eden.

Hey, this story is proof that capitalism works. Here is a company with a CEO that commited fraud and the market hasn't wasted any time in punishing them. Capitalism doesn't promise a garden of Eden.

Now compare this with Amtrak that has spent the past 20 years losing money and is now asking congress for another $200 million.

Re:You mean CEO's aren't honest?

[rodgerd]

I didn't realise we had members of the Bush administration posting to /.; that line's getting a bit tired since you used it WRT Enron.

Re:You mean CEO's aren't honest?

[Anonymous Coward]

What's your point fuckface?

Sometimes government needs to save people from their stupid-ass-selves and Amtrak is a perfect example. Without Amtrak you'd have 5 million more dumb fucks per day sailing off into morning gridlock in their 10mpg Escalades to their shite marketing jobs in the city. The VERY powerful and VERY influencial gasoline and automobile lobby has ensured that public transportation will never be a viable alternative in the US like it is, even in sorry backwards Socialist places like Europe. As long as the oil oozes from the earth in the mideast, affordably, consumers will stand proudly in front of their suburban assault vehicles and take a STAND against communist philosophy such as public transport. Whoever the genius is who has managed to throw a paltry (by Ken Lay standards) 200 mil at Amtrak and the precious few who pick the sensible alternative deserves a medal!

Re:You mean CEO's aren't honest?

[mc6809e]

I didn't realise we had members of the Bush administration posting to /.; that line's getting a bit tired since you used it WRT Enron.

Bullshit. Its a fucking miracle anything pro-capitalism gets posted. Whats tired is the constant anti-capitalist rants seen here over-and-over. Well guess fucking what: capitalism has won. Anyone who believes anything else is living in a dream world.

This anti-capitalist mentality is nothing but recycled late-19th century leftism and old as fucking dirt. Now thats tired.

Re:You mean CEO's aren't honest?

[mc6809e]

Without Amtrak you'd have 5 million more dumb fucks per day sailing off into morning gridlock in their 10mpg Escalades to their shite marketing jobs in the city.

If you took 5 seconds to check Amtrak's site, you'd find there are about 60,000 guests per day, in the whole country. Thats a drop in the bucket compared to automobile traffic.


The VERY powerful and VERY influencial gasoline and automobile lobby has ensured that public transportation will never be a viable alternative in the US

Public transportation isn't viable because its a pain in the ass. I drive an automobile because I can afford it.

Re:You mean CEO's aren't honest?

[Anonymous Coward]

This is exactly what 1970 generations did tailored for 2000.
Bash everything this country stands - it is trendy.

Re:You mean CEO's aren't honest?

[peccary]

The cream rises to the top.
But so does the scum.

Re:You mean CEO's aren't honest?

[Anonymous Coward]

> Hey, this story is proof that capitalism works

Oh, FFS. I am tired of hearing how every disaster is proof that 'capitalism works'. Or how a posible criminal conspiracy is proof 'capitalism works'. Or any old shite hitting the fan is proof 'capitalism works'

North American capitalism in its current form, does *not* work.

Re:You mean CEO's aren't honest?

[Anonymous Coward]

Public transportation isn't viable because its a pain in the ass. I drive an automobile because I can afford it.

What a foolish man. *sigh*

Damn you really are a fucking moron.

Re:You mean CEO's aren't honest?

[coastwalker]

Actualy capitalism has won the battle with centralised state controled communism - I dont see anyone advocating that here.

What people are complaining about is particular aspects of the way we are running capitalism now. - Allowing laws to be broken, stock markets which appear to function for the interests of the investors in the market whilst causing socialy unaceptable behaviour in the companies quoted on the market.
- any number of complaints about what we dont like about the current mechanisms of the free market. If you equated the 'free market' with anarchy then I might even be tempted to agree with you on philosophical grounds. But actualy what you mean by the 'free market' is a well defined system which you personally expect to do well from - I can tell this because you expect your enemy to be someone you have disadvantaged by your activities and is calling for more social justice - a commie. Your guilt gives you away, you want a system where you can personaly exploit other people.

What most of the world also wants is the sucess of capitalism - thats no reason to allow serious crime to undermine the rest of your social order by failing to curb its excesses.

Re:excuse me, sir

[rice_burners_suck]

jeez d00d, u'r worse than me!

But it's ALREADY illegal.

[Ungrounded Lightning]

People that cheat thousands of everyday people out of money that they invest in their 401k, IRA, or other investment vehicle should get life at hard labor. It is high time the Federal Government tightened up corporate law ...

But it's already illegal!

and DRASTICALLY increased penalties for offenders. No Club Fed for this guy or Ken Lay and his Enron cronies. No, they need to spend their lives in Lousisana's Angola Prison where deer and Aligators play and everyone stands upright in the shower.

I'm completely with you there. Who cares whether the crook took a thousand bux by waylaying you on the way from the bank, cracking your account, burlgling your house, scamming you, or faking a corporate financial report and causing you to lose it in the market? You're out just as many bux.

(Extra points for force and threat of force, of course.)

Re:But it's ALREADY illegal.

[Shelled]

100% agreement. It's something that I first noticed in the aftermath of the Savings and Loan scandal a couple decades ago. There are still people in prison from that time for using a gun to commit robbery without causing anyone bodily harm, yet the architects of the S&L scandal who destroyed the future of uncounted thousands have long finished serving their barbed-wire golf course sentences. This won't stop until the perpetrators are punished with real hard time and long (read: life) terms.

Good thing the analysts have this one covered!

[JohnA]

Yet more proof that analysts do not have a clue as to what is going on in the market. I particularly like JP Morgan's coverage, which was initiated a long-term buy at around 30, then upgraded to a buy at around 8.

Re:Good thing the analysts have this one covered!

[maxume]

Granted, the upgrade to buy at 8 now looks foolish, but it isn't really an unreasonable thing to do. If they liked the stock at 30, why wounldn't they like it even more at 8? Unless of course, they are just guessing, which is what I guess you are getting at...

Re:Good thing the analysts have this one covered!

[Ko5mo]

That is the oldest trick in the book, pumping up the stock so that their big clients can sell high(er).

Re:Good thing the analysts have this one covered!

[Anonymous Coward]

Of course, this shows that analysts have no more clue as to accounting shenanigans than anyone else. How could they? You can't blame the analysts for being lied to.

Re:25 of 29 biggest telecom companies will go bye-

[rudy_wayne]

The comparison to the auto industry doesn't work. Back when there were 50 auto companies
there were a lot fewer people in the US and a lot less demand for cars. A shake-out was inevitable.
There would be no need for any of those 25 telecom companies to go broke if they were run properly -- there's plenty of customers and plenty of demand.

What we are seeing with WorldCom, Enron, Tyco, ect. is a recurring pattern. Companies with lots of customers and lots of revenue -- who are going broke. More and more companies are becoming the playthings of the wealthy elite and Wall Street -- existing not to produce goods and services but existing only to enrich a handful of people.

example -- @Home had over 4 million customers paying $45 a month. Do the math. And yet they went broke. Could it be the $6 Billion they blew on a worthless dotcom?

example -- Exodus Communications had $300 million gross revenue in 2000. In 2001 they had $660 million gross revenue -- more than double the previous year -- and filed for Chapter 11 at the end of 2001. Why? Blowing hundred of millions on bad aquisitions.

example -- AT&T hires a new CEO. Fires him less that a year later, citing "a lack of intellectual leadership" as the reason. But gives him a $26 million severance package.

example -- Hewlett-Packard/Compaq -- History shows very clearly that there has never been a merger of this type that has worked out well. Not one. And yet the deal was done anyway because it will enrich the people who engineered the deal. 5 years from now, when Hewlett-Packard is following in the footsteps of WorldCom and Carly Fiorina is fired by the HP board of directors, it won't matter -- she and a few others will have already pocketed their millions and will draw a nice severeance package as a reward for running the company into the ground.

example -- Dozens of companies who are doing poorly, profits are down, even losing money in some cases, but top executives receive large raises and bonuses.

You're a fucking moron.

[Wakko Warner]

Maybe we should murder you for such a Slashdot-Retarded comment.

- A.P.

prologue

[Anonymous Coward]

He'd be on a boat to the bahamas, and what cash is left will go to lawyers to tell the staff there's no cash left for their entitlements, and to tell the small shareholders "sorry". The large shareholders of course would have been "in the know" and sold their stock over the last few weeks.

Punishment

[Anonymous Coward]

Skylarov: Possible life sentence in prison.

Enron CEO: Nothing.

WorldCom CFO: Nothing.

What's wrong with this picture?

Doesn't surprise me considering their reputation

[Neutropia_1]

I mean, just read all of the controversy swirling about the net regarding their high incident rates of slamming their telco customers.....That and the endless billing nightmares and customer service run arounds - it all boils down to one thing, bankrupcy.....Never invest in a shady company!

enron again?

[_ph1ux_]

ya, but how exactly is he related to Dick Cheney?

The funny thing is that they still have a huge ass enron sign up at pac bell park in SF. These mega-corp scandals are just getting worse and worse.

Its not to say that this bulshit hasnt been happening for hundreds of years... but its about flipping time that some light got shed on it - and maybe the world can start getting rid of all the BS criminalism in corporations and governments by seeing this shit and finally saying that we have had enough. I am not in favor of the death penalty for humans - but i consider people who do these sorts of thing (and car salesmen/politicians) to be sub-human... so I ahve no problem with death penalties for such massive rip off scams as this.

It was a nice idea

[twilight30]

but it lacked in the execution. In all honesty the Frontline special on the fall of the dotcoms, broadcast originally 24 January of this year, explained certain aspects of the current malaise much more dramatically -- and sounded like less of a history lesson to boot.

The companion website linked above has an extensive set of links and interviews. Highly recommended.

Re:It was a nice idea

[analog_line]

I actually taped that broadcast, and I think a history lesson is really necessary. I thought it was a very good history lesson, because I sat, starting, remembering watching half of the clips when they were happening (like the VA Linux IPO) and staring slack-jawed at the screen, wondering how we could've been so idiotic.

I think many people forget the kind of craziness that actually happened back then. A good history lesson is what we need, and what we need to impress on our Representatives and Senators that we are unwilling to repeat.

Re:It was a nice idea

[Bill the Cat]

By all means write your legislative representatives; we may see a few beneficial reforms come out of all this mess.

Never forget, however, that capital markets and economies are changed by people making individual decisions. The lessons of history need to be learned by those people. Governmental action may help a little, but ultimately it's the thousands of people that pushed the 'buy' button that rewarded the execs of these companies for making bad decisions.

Not Uncommon

[jhunsake]

Having talked with several accountants, they all seemed to operate under the accounting rules that will likely be in effect in the short-term (within a year) future. This rather than operate under the rules currently in effect. I'm not sure what their justification is for such behavior, but I can say it is common behavior (and IMHO very odd).

Re:Doesn't surprise me considering their reputatio

[Anonymous Coward]

this is exactly the problem... what is a "shady company"???

it could be absolutely any of them these days

So the "d" in Generation d

[Anonymous Coward]

means *d*oomed ?

American Capitalism

[Anonymous Coward]

This is american capitalism at its finest boys.

Funny thing related to this...

[Anonymous Coward]

Check this out. I just caught it on CNBC Interactive TV (DirecTV feature):

http://home.mpinet.net/jcauthen/worldcom/

Re:Funny thing related to this...

[Anonymous Coward]

I'd mod you up if I had points left. As a Worldcom employee, I find this funny!! [ac'd so I'll remain at the company 2 more days]

Corporate Imperialism

[niola]

Enron, Tyco, ImClone, Worldcom...

All examples of companies that have become large and powerful by being deceptive. What does the US government do about it? Not a damn thing. Why? Because they are all big spenders and heavily linked to the political status quo.

If you want to read a really enlightening book, check out Stupid White Men - I kid you not, this book will open your eyes.

We are at a point in the world where there is a new aristocracy - the corporate powers - and it is only getting worse. You think they control the government now? Give them another 6 years of this administration and we will all miss the days of individual freedom...

Sorry if I come across as a downer - things just don't seem that good these days...

Just my $.002

--Jon

Re:Corporate Imperialism

[mc6809e]

Enron, Tyco, ImClone, Worldcom...

All examples of companies that have become large and powerful by being deceptive.

Yeah, and all these companies are in the shit-can because they were deceptive. They have all lost power. This is good. This is the way it is supposed to work.

People are running around crying about how awful capitalism is because this happened. This sort of thing is exactly what should happen. You fuck-up an lie, and your company is screwed. Good.

Re:Corporate Imperialism

[Anonymous Coward]

You do, of course, realize that most of the overvaluation these companies enjoyed happened during the previous administration. They had eight years to prevent it...

BTW, Moore is a fool's populist. Best find other influences for yourself.

Re:Corporate Imperialism

[mc6809e]

If you want to read a really enlightening book, check out Stupid White Men [amazon.com] - I kid you not, this book will open your eyes.

This book is by Michael Moore, the same man who's first reaction to the slaughter of 3000 people on 9/11 was to wonder why the terrorists didn't kill more Republicans. Yeah, he's a great guy.

Re:Corporate Imperialism

[groomed]

Um, but what happens when the people who were supposed to watch out for the liars, were themselves lying?

I sort of agree with your sentiment, the system works and all that, but it's not good if tens of thousands of people lose their jobs and their money. Some of them will never recover.

Every situation has a way of straightening itself out. But that's not much good if there is nobody around to enjoy the results.

Re:Corporate Imperialism

[tcc]

----
People are running around crying about how awful capitalism is because this happened. This sort of thing is exactly what should happen. You fuck-up an lie, and your company is screwed. Good.
----

Go tell that to the people who bought mutual funds with those stocks, go tell that to all the small shareholders that don't go inside the company and hire a private investigator for their 5 or 10K$ investment, go tell that to the people like your neighbour who probably lost a few months of raw salary because of those assholes.

What are you going to say, they should deserve this as well? so are the analysts? I mean, to some extent, maybe... but in real life, when you buy mutual funds or anything that isn't DIRECT stocks in DIRECT trading, when it's offered by banks or other legitimate 3rd parties, which people trust and we all know that banks usually aren't fooling around and messing up when it comes to profit and managing, you expect them to have done their Due dilligence for you, that's why you pay an extra fee and all... So where do you go from here? a lot of people will pull out their stocks market will probably be even more unstable, and if you are very very unlucky, another lunatic will do something stupid in the name of allah and wreak havoc in the stock markets.

This really is a sad time for economy... :(

And the worst of it is the top execs will probably not learn anything from this.

Re:Corporate Imperialism

[Anonymous Coward]

When are they going to publish my book "Stupid Black Men" ??? It's funny how it is okay to be racist as long as it is white people you are prejudiced against.

Re:Corporate Imperialism

[Locke!Erasmus]

I am not sure I agree with your assertions in their entirety.

It is true that some, and maybe a lot, of people at WorldCom knew what was happening. They lied, they screwed up, etc...

At the same time, I'm also sure of the fact that there were and are probably many more people working or investing in WorldCom who are going to be punished by losing their jobs, money, or retirement because of the bad decisions of a few.

Where is the justice in that, mc6809e?

Re:Corporate Imperialism

[jafac]

I don't think capitalism is all that bad.

I just wish that the government spent as much money and zeal in enforcing good corporate citizenship and accounting practices and trading rules as they apparently want to do for "terorism". Look at your headcount of the SEC compared to the headcount of the FBI and you'll see what I mean.

Re:Corporate Imperialism

[Anonymous Coward]

Michael Moore is a piece of shit. He rants in his book about how americans eat too much and are too fat and yet he would definately be classified as "obese" given his weight and heigh. He rants against people who pollute the earth and drive gas guzzling SUVs, yet later in the book he admits to owning an SUV himself, and a total of three cars between him and his wife. What a crock of shit. That's not even mentioning his reaction to 9/11.

Re:Corporate Imperialism

[alexdw]

> Just my $.002

A couple more posts like that, and you can buy shares in WorldCom!

More Accounting Scandals -- why? you ask ...

[Anonymous Coward]

Let's see, besides the numerous internet bombs, I can name the following big caps that are heading towards bankruptcy, or are have succeeded:

enron
adelphia
global xing
excite
primedia
kmart
wcom
help me complete the list here....

The Real Threat

[Anonymous Coward]

The real threat comes when a government is elected that claims to be "a friend of business".

CEO's everywhere take this as a sign to loot their companies of as much as they can get away with.

This explains the apparent paradox that the stock markets seem to do better under Democrat administrations than under Republican ones. Greed runs rampant under the "business friendly" Republican administrations while caution prevails under the hostile Democrats.

This may be changing now, however. Everybody now is so corrupted by campaign finance excesses that fraud is equally possible under any administration (maybe even probable).

This reminds me of billy joel

[f00zbll]

Those old enough to grow up listening to billy joel know his story of being cheated and lied to repeatedly. Now he manages his own finances.

Guess what people! Think for yourself. Don't trust some idiot just because the letter CEO, CFO, CIO, CTO or CFUO (Chief F..k U Officer). When are people going to realize life isn't like cruise control. Cruise control almost always means someone else is in control. What happened sucks big time. Alot of hard working people got hurt big time. Group thinking is dangerous, so it's time for America to realize critical thought is healthy. Critical thinking means putting aside one's own bias and perspective to analyze a situation objectively. It most definitely doesn't mean jumping on open source bandwagon, .NET bandwagon or Java bandwagon.

It's about working your ass off about everything and checking everything. Yeah, it takes a shit load of time to manage all these things, but in the end it pays off.

Re:This reminds me of billy joel

[Cognitive Dissident]

"Secrecy is the beginning of tyranny." -- Thomas Jefferson

This holds true in politics, finance, and information per se -- like software source code. Something else to point out to people when 'Open Source Software' comes up in conversation. When people have control of vast amounts of power of any sort, financial or otherwise, they are tempted to abuse it. If one guy with control of a corporation's books can do this, what can one guy -- or even a few if you count the team instead of their boss -- with control of nearly all corporations accounting software do?

Re:This reminds me of billy joel

[rowls]

I think Billy just checked himself into rehab. Not that it has much to do with the point that you're making.

Re:This reminds me of billy joel

[f00zbll]

I'm being off topic, so what!

That's probably why billy joel came to mind when I read the post.

The opposite of the Movie Industry

[Anonymous Coward]

Worldcom classified expenses as capital expenditures, so they could write of their expenses over a longer period, thereby inflating short-term profits, and making their growth curve look sharper than it actually was. It's basically the same thing as booking orders as actual revenue.

The funny thing is that this is almost the opposite of the entertainment industry. The movie studios try and expense as many things as possible, in order to show NO profits, and avoid such things as paying taxes and profit-sharing.

Is RedHat next?

[Anonymous Coward]

RedHat seems to engage in similar schemes, but not just at the CFO level. Have you seen the massive amounts of insider trading RedHat management engages in? While insider trading is not necessarily illegal (only illegal when they have specific information, IIRC), management's actions clearly show an intent to screw over the public.

Don't get me wrong, long live Linux, but RedHat's shareholders are getting robbed, just as WordlCom's shareholders are currently screwed.

Re:Is RedHat next?

[Anonymous Coward]

What about all those sourceforge banner ads that run at the top of the slahsdot page, I wonder if slahsdot books that as revenue, then buys copies of sourceforge with that "revenue"( round trip trade, since of course soresforge and $lashdot are really the same company). Just curious if they do that, I don't know if they do. Maybe they should if it would keep them from being delisted from NASDAQ.

As far as redhat goes, I couldn't give a shit if they go under. A plus is that it would be entertaining, kind of like a good car crash.

Adelphia

[Anonymous Coward]

A somewhat similar case: Adelphia and Adelphia Business Solutions. The founding family, the Rigas's somehow got away with 3 billion in loans of various forms without mentioning them on the book (Used to prop up the Buffalo Sabers that the Rigas famly owned, buy timber land owned by the Rigas family, help develop a golf course owned by the Rigas family, payed for apartments/homes used by the Rigas family, etc etc).

ABS filed Chapter 11 several months ago and this evening Adelphia filed Chapter 11. The result from all this has cost over 500 people their jobs. (No severance packages because of the situation).

The Rigas family was asked to leave the board of directors of both units (John Rigas however will be getting a severance pay of 1.6 million for the next three years).

Note, this is being posted anonymously because I still work for one of Adelphia's departments. Posting critizing info may get you fired.
Stealing 3 billion gets you a severance package.

Re:Adelphia

[Anonymous Coward]

No kidding. I was also an ABS / Adelphia employee - one of those groups that supported both business units. I also supported Ms. Rigas' office in NYC...if that gives you any idea what I did.
Truely terrifying to watch all the job cuts and stock drop. I didn't wait, I ran as fast as I could, looking for new employment.

I'm not sorry

[tuxlove]

I want to see them die in flames. For several years now I have refused to patronize these guys in any way, after they tried to screw me good.

I used to have MCI Worldcom as my wireless phone provider, and it took me *five months* to cancel my account when I switched to another provider. In the meantime, they billed me for other peoples' calls and double-and-triple-billed me each month. I called them every month when I got a new bogus bill, and had to wait in the queue for an hour each time. Each time I called they had no record of my previous calls, so it was back to square one. In the meantime, bills continued rolling in, and they refused to reverse the charges because they had no proof that I had already cancelled service. I finally screamed at someone loud enough that they fixed the problem.

In repayment, I cancelled all services I had with them (long distance service) and promptly hung up on any of their telemarketers brazen enough to solicit me. Seeing them go under would be justice. I don't believe that companies run so poorly should continue to exist.

Re:I'm not sorry

[Anonymous Coward]

Ever think of writing a letter and sending it via certified mail to prove they were notified? I think it costs a buck.

Re:I'm not sorry

[tuxlove]

Would it really have made any difference? And I would have wasted a buck instead of making them pay for my toll-free call.

Re:25 of 29 biggest telecom companies will go bye-

[Anonymous Coward]

The analogy between early auto manufacturers and present telecoms is actually correct with regard to the supply/demand ratio. ATM, most of the fiber these telecoms built is dark.

Telecom is a natural oligopoly market. Like auto manufactures, it's simply better to have a small number of large producers in moderate competition with one another. The telecom market is maturing. This begins with shaking out the crappy models.

Your other points on the relative value of CEO's are all valid and correct. Frankly, you could probably pull a moderately bright loser out of the mail room and get better results.

Not funny... serious.

[(eternal_software)]

This is a serious situation. This fraud has cost 17,000 people their jobs and many others their life savings.

A quick peek of the Yahoo WCOM Message Boards shows many desperate messages about people threatening suicide and serious financial losses.

These are the people who the suits at the top never think of, while they enrich themselves.

Re:Not funny... serious.

[Drachemorder]

Actually, they've been planning those 17,000 layoffs for a while now. (I know, I work for a WCOM company ... at least this week.) It's anybody's guess which came first, the scandal or the axe.

Re:Not funny... serious.

[Anonymous Coward]

Time to crack some CEO heads open I think. We need to stop being such pussies.

Re:Not funny... serious.

[Anonymous Coward]

Here's one thread:

>> I HAVE LOST EVERYTHING BECAUSE OF THIS POS
>> COMPANY, NOW I WILL KILL MYSELF!
> no you family am not going to get you life
> insurance if you kill you self. have someone do
> it for you
Depends on the policy and how long that he has had it. Call your agent.

Re:Not funny... serious.

[0WaitState]

So before you jump on the bandwagon of "blame the rich guys who pirated the corporate accounts and stole nearly $4B and kept it for themselves" wait for the actual story. Chances are that money was never in the door, and profits were inflated to trick the public into thinking things were okay. Granted this is fradulent and deceptive, but its probably not how you describe it: a case of a few people stealing to enrich themselves.

Much as I'd like to join you planet Naive (soon to appear in a bad Lucas movie), perhaps you might consider stock options, which are worth a lot more if you kite the stock upwards? Or incentive clauses, such as forgivement of loans if stock price targets are met? I don't know if WorldCom execs made use of these standard vehicles for executive compensation, but that's been SOP in other corporate meltdowns. They don't steal cash, they prop up the stock with fraud while exercising their options (which although they are not yet required to be considered a hit against company earnings, definitely do reduce the company's equity dollar for dollar when exercized.)

Re:Not funny... serious.

[Patoski]

Chances are that money was never in the door, and profits were inflated to trick the public into thinking things were okay. Granted this is fradulent and deceptive, but its probably not how you describe it: a case of a few people stealing to enrich themselves.

Yes, what these sleazy CFO execs have done and are doing is far worse than just skimming money for their own enrichment. They're erroding investor confidence in the stock market which is critical to the US (and hence) the world's general economic health. This isn't to say that the world revolves around the US but when any major country's economy tanks, today it has profound effects on the economies of other nations. This injures the common world market as well adding to general economic instability which has far more reaching effects than some greedy executive taking $4.6 billion out of the corp. till.

Re:Not funny... serious.

[(eternal_software)]

Chances are that money was never in the door, and profits were inflated to trick the public into thinking things were okay.

And what does tricking the public do?

Gets them to buy stock, and thus raise the stock price.

And who has millions of shares of the stock?

The guys at the top.

Re:Not funny... serious.

[TheSync]

See, thats the thing. We assume that this was done to enrich executives. This is not probably true.

For instance, earlier this year there was the discovery of massive sales commission fraud at WCOM, done by salespeople.

A friend of mine was interviewing at WCOM for a sales position in February. The people there were saying "Sure, base is only $40k, but we make up to $150k with commission..." On his second interview, the people who were going to hire him were gone.

Re:Not funny... serious.

[SubtleNuance]

Chances are that money was never in the door, and profits were inflated to trick the public into thinking things were okay. Granted this is fraudulent and deceptive, but its probably not how you describe it: a case of a few people stealing to enrich themselves.

No, in both Cases (Enron / Worldcom) these filthy Plutocrats did not simply embezzle millions. What they did was lie and cheat, using the whole business as a machine not to make Widgets but to create wealth on Wallstreet (and in their pockets bc they are almost all compensated via massive stock options).

So what we have here is rich executives hiding the truth in order to ride the whole thing to the next big payout for themselves, with no consideration for the small stock holders (they will have cashed out) or the Institutional holders (and MFunds), Fuck the Employees and the Suppliers -- hide the reality of the business as long as possible in order to get enough money out of the Stock Markets.

Isnt compensation via Stock a virtual guarantee of conflict of interest and insider trading? I mean Christ, only the truly perverted, greedy, slimy scum rises above low-level management in Corporate America -- its like holding AA meetings in a Beer Store -- these jackals promote one another on their LACK of moral fibre, then congratulate (and enrich) one another for being unscrupulous.

Re:Not funny... serious.

[Ami_Chan]

I definately agree that this is a serious situation. I myself have lost a fair amount of money on WorldCom. My father and broker had bought it at a lovely $76 a share long before I had control of my own accounts. After I turned 18, I sold it for around $15. And I'm glad I did. WCOM has just been a downhill slope, and frankly, I'm not that surprised to hear of the fraud.

Re:Not funny... serious.

[klaun]

Fraud is bad yes, but this is not benefiting (in this case) the executives. It is early to say, but this isn't looking like a case of some rich guys stealing from the company for profit.

The underlying issue is the business, not the accounting used to patch things up. Enron was a money losing organziation, who hid that from everyone using accounting tricks. They went bankrupt due to the core business being very risky and volatile - not due to the accounting tricks.

Whatever the reason for the bankruptcy of Enron and others, the executives have made decisions that enriched themselves and left their employees with nothing.

Enron gave senior executives $55 million in retention bonuses immediately before it filed for bankruptcy. It didn't make any attempt to retrieve the money even after several executives left, failing to meet the obligations of the retention bonus. After it filed for bankruptcy it laid off 4,500 employees who received no severance because the company didn't have any money to pay them. Of course they would have if all the executives hadn't stolen $55 million out of company coffers.

But that wasn't all, they also invested all of their employees 401k money in Enron and so left them doubly screwed when they went out of business.

So before you jump on the bandwagon of "blame the rich guys who pirated the corporate accounts and stole nearly $4B and kept it for themselves" wait for the actual story. Chances are that money was never in the door, and profits were inflated to trick the public into thinking things were okay. Granted this is fradulent and deceptive, but its probably not how you describe it: a case of a few people stealing to enrich themselves.

Of course most executive get hefty bonuses for high revenues and profits... the fraud wasn't some selfless devotion to the company... it was for personal gain. And then they are usually heavily invested in the company and want to make their stock go up so they can sell it. Also not a selfless goal... So before you spend your time defending rich people who steal the money of their employees, get your head on straight.

Re:Not funny... serious.

[Aexia]

Looking back on these boards, as well as other companies, is very interesting.

From May 9th...
Sales are in talks (Supposedly) that are to be announced within the next month or so, leading to believe that WCOM may become 'Liquidation World' for other Carriers.

WCOM is ready to fall below a dollar

Re:Not funny... serious.

[Anonymous Coward]

What Worldcom are you thinking of?

Re:Not funny... serious.

[Anonymous Cow herd]

The only problem with this is that obviously stock prices aren't at all linked to performance at all... certainly not in any direct and psychologically meaningful way... If I'm over at division X of the company, kicking ass and taking names, revenue and sales wise, but some corporate PHB buys another company that turns into Colerige's freakin albatross around our corporate necks, haemorraging money faster than we can make it, what "inscentive" is there for me? I get to sit here and watch my "employee inscentive" turn to so much toilet paper, in spite of division-wide good financial and technical performance, because some PHB can't admit to his mistakes and chop off the dead wood dragging us down?

This isn't even taking into account random fluctuations in the market, or dot-bomb-esque scenarios... so now my pay is tied to market scares caused by Arthur Anderson, Enron, WorldCom, and every other two-bit schmuck who does the wall street equivalent of a smash n' grab?

Same here at Concert / BT Ignite!

[Anonymous Coward]

To me this is a big DUH! Because here at Concert / BT Ignite in the United States (Atlanta office) I see the execs buying PBX systems (David Dorman no less!) and having them installed in their houses using company people. Execs buying $30,000 USD stereo systems for their houses, etc... I wish the Feds would check our books and bust our F$#*ing low-life, money wasting executives!

Dark0ne

Re:Same here at Concert / BT Ignite!

[David Off]

Hah, it is a bit like the old BT/MCI partnership which was largely an excuse for BT execs and management to go skiing. They even kept a ski locker room at the MCI building with 'corporate' skis.

I meet a lot of managers who don't even understand that what they are doing, at the very least, violates tax rules. You can't go on a skiing holiday and claim it as a tax deductable expense!

Wow, and I just interviewed there....

[ewwhite]

I guess that won't be working out. Is there a such thing as a stable company now? Heck, Worldcom just laid-off a large number of employees...

The persons responsible are..

[iamgarageguy]

The stockholders - who wake up one day and decide to play the market and suddenly become market experts and collectively pressure companies to show a profit next quarter or out with the CEO.

So who should we get connectivity from?

[alienmole]

Some of my clients use Worldcom (UUNet). One of them has been burned by an ISP bankruptcy before (PSI), and another by a local provider that screwed up a premises move and went dark for days. Does anyone have any suggestions on who's a safe bet to switch to? Worldcom had some good pricing on their burstable T1s, quite a bit cheaper than e.g. AT&T, IIRC.

Customers like choosing big-name companies because they seem like they ought to be safe. I've come across some real horror stories related to smaller, more local ISPs. So, what's an ordinary business supposed to do to get ISP service that they can rely on for a few years running, without paying through the nose?

Re:So who should we get connectivity from?

[Mashiki]

hmm...just a couple off the top of my head that I've seen.

teleglobe, AT&T(shudder expensive), verio, sprint, level3.

Re:So who should we get connectivity from?

[Anonymous Coward]

get lines to multiple providers. or buy from a local non-"tier one" provider if you can't afford the redundancy yourself.

And the first news article at that link says...

[Brian Stretch]

Tuesday June 18, 8:00 am Eastern Time
Press Release
SOURCE: OSDN

Forbes.com Provides Readers With Newsfeed From Slashdot

Slashdot-Branded Area Provides Forbes.com Readers With Cutting-Edge, High Tech Content
ACTON, MA--(INTERNET WIRE)--Jun 18, 2002 -- OSDN and Forbes.com today announced that Forbes.com will feature a newsfeed from Slashdot® -- one of OSDN's premier web sites -- providing senior-level business readers with access to cutting-edge, high-tech content online.

Forbes.com's recent web site redesign prominently features a Slashdot-branded area with a newsfeed from the site. Slashdot is one of the largest tech sites on the web, with coverage ranging from the ultra-technical to the ultra-controversial. Slashdot joins sites such as Reuters, which provides widespread news, and The McKinsey Group, which provides research updates, to Forbes.com readers.

"We were thrilled when Forbes.com expressed interest in a newsfeed from Slashdot because it will direct even more senior-level business professionals to the Slashdot site," said Richard French, general manager, OSDN. "This move will help to position OSDN to business readers as the place for high tech content, and will help OSDN continue to gain credibility in broader business markets."

"We pursued Slashdot because we think it will add to Forbes.com's Technology channel by providing the caliber of high-tech news our senior executive readership wants," said Paul Maidment, editor, Forbes.com. "Slashdot is a welcome addition to our site."


OK, now I'm scared...

Re:And the first news article at that link says...

[Anonymous Coward]

So, I just got through downloading the internet and I somehow ended up here from the Forbes site. My question is, what's this version of Windows called Linux and can I use it to send email?

LOOK at this!!!

[sinserve]

FORBES suits now reading slashdot for up to the minute technical information.

Behave yourselves trolls, you are "providing senior-level business readers with access to cutting-edge, high-tech content"

ROFLMAO

Re:LOOK at this!!!

[matrix29]

FORBES suits now reading slashdot [yahoo.com] for up to the minute technical information.

Behave yourselves trolls, you are "providing senior-level business readers with access to cutting-edge, high-tech content"

ROFLMAO I thought you were bullshitting me until I clicked the link. MOD THAT PARENT POST UP! Should we all give a collective shudder when www.goatse.cx hits the NASDAQ? I know I will.

Prison Rape

[Milican]

Very informative article...

JOhn

Re:Prison Rape

[Anonymous Coward]

The article doesn't say why they don't put the rapists in prison and be done with them.

Re:Prison Rape

[md358]

On a totally and completely different topic: I've noticed that Americans, for the most part, seem to equate prison with rape. Certainly forcibile sodomy has been going on since time immmorial in jails, but it's been openly acknowledged as a problem for the last few centuries and steps have been taken to minimize it. But back to my original point, Americans take for granted that prisoners in jail are raped by bigger, meaner criminals, and yet they don't really care.... it's more of an inevitability than a problem to them. Do they condone rape as just punishment for breaking the law?

Re:Prison Rape

[Anonymous Coward]

Actually i'd say the tales of prison rape are greatly exagerrated.

Most people crying rape are:

a) Trying to sue the government for a fat check

b) Willingly performed sex acts for protection/gambling debts/cigarettes/whatever and are now trying to lie to themselves as much as everyone else about it

Sure it happens but it's really pretty rare. You're more likely to just get an old fashioned beatdown over any sexual stuff. Rape should be the least of your worries, getting stabbed, strangled or just getting your head stomped is what you should probably concern yourself with...

But as someone who has served time let me tell you really it's not like in the movies where every day is an animalistic fight for survival or something...

In reality 99% of your time is just going to be fucking boring as hell.

Re:Prison Rape

[CynicTheHedgehog]

It's similar to a couple of movies that were made some time back, Escape from New York and Escape from L.A.. In both, "prison" was an isolated society without rules. Persons convicted of certain crimes were dropped in the middle and left to make it on their own. If you don't want to live with the lawful, live with the lawless.

So yes, in a way, we do sort of condone it, but it's not like prison guards are supposed to let it happen if they see it. It's one of those things that we hope will make people think twice about breaking the law, since prison itself isn't such a great deterrent. Realistically, we can't eliminate it, so we capitalize on it. 6 months in prison isn't so bad; 6 months in prison with the possibility of being sodomized, however, is something to think about, especially if you are some soft corporate executive.

Re:Prison Rape

[revscat]

So yes, in a way, we do sort of condone it, but it's not like prison guards are supposed to let it happen if they see it. It's one of those things that we hope will make people think twice about breaking the law, since prison itself isn't such a great deterrent.

Gee, I think you would have a hard time showing "forced butt rape" to be written in any penal statute anywhere in the nation. People get sentenced to prison, not forced rape. If you want to change the law, then change the law. Until then rape is against the law and should be as vigorously prosecuted as any other.

Can't wait till they haul one of your sons off to jail for something relatively minor, and the next thing you know he's somebody's bitch.

Re:Prison Rape

[ronfar]

The main problem is that America is currently a sick society (in a Heinleinian sense of the words). You can see it throughout the social structure, but it really come to the forefront when you look at rehabilitation of criminals. You see there are really only two kinds of criminals, the ones that society wants to rehabilitate and the ones that are deemed too evil or dangerous to rehabilitate. Most (possibly all) of the people who are being forcibly sodomized in prison fall into the first catagory, but a significant portion of "law abiding" American society has reached a level of barbarism that they would probably be happy if "hanging, drawing and quartering" were brought back.

Even if you hate criminals and think they should get no mercy, it is insane, as a society, to subject them to cruel, unusual and depraved punishments and then release them back into society. (Or to encourage other criminals, probably among the worst, to commit such abuses and then release them into society at large.)

So why do the people who run American society not only tolerate but encourage this type of abuse? Simple, maintaining tyranny requires brutal and horrible punishment. They get a lot of people to go along with it as a form of entertainment, the same way the Romans got people to go along with their atrocities.

If prison weren't horrible, more people who would never become hardened criminals would be encouraged to disobey the arbitrary and unjust laws we come up with in this country. The way the prisons get around the constitutional prohibitions against cruel and unusual punishment is to have the prisoners abused by other prisoners rather than directly by prison personel.

Viva La Revolution!

[s.fontinalis]

For opposing the justness of our cause, and the righteousness of our violence, you sir, shall have the honor of being the first up against the wall when the revolution comes!

I work at Worldcom.

[Anonymous Coward]

Not for Worldcom, but at Worldcom (when I'm not working from home). I think all of us saw some *massive* cost cutting going on left and right over the past few months. We knew they were trying hard to make money. But I don't think any of my coworkers expected this, judging by the expletives coming in over IM right now.

I think I'll be one of the crazy ones and ride this out, though. As I don't work directly for Worldcom, I am shielded from the 25% layoffs this Friday [and the mass contractor firings earlier]. But there is going to be more than a ripple into I.T., that is for sure...

Posted AC so I'm not fired (prematurely).

Getting Is Not Taking

[Anonymous Coward]

No, his getting money does not mean that others would have gotten the same amount otherwise. Wealth is not a zero-sum game. You have to consider how much wealth was created, not just how much was transferred where.

Six Degrees/Cheney

[Anonymous Coward]

What, we're playing Six Degrees Of Separation From Dick Cheney?

OT: Is there any way to block "Funny:5" posts?

[VividU]

Almost never really funny.

Re:OT: Is there any way to block "Funny:5" posts?

[VividU]

Sorry, I figuered it out. MOD ME DOWN!!!!

Re:OT: Is there any way to block "Funny:5" posts?

[kitzilla]

Nah, it's funny. I'd mod you to a 5, but...

Re:OT: Is there any way to block "Funny:5" posts?

[Anonymous Coward]

psst: Martha Stewart holds celebrity status in the United States, and is currently accused of engaging in insider trading with a company with which she holds stock. Translation: Someone employed by that company told her the stock was about to tumble big, and she sold her shares before the tumbling.

Wow, I might just invest...

[CrazyDuke]

...can't beat $20 for 100 shares of a major telecom/isp.

Look At What Is Taught In Business Schools!!!

[Anonymous Coward]

In the discussions about Enron much was made about the fact that Jeffrey Skilling learned all about his famous theories about the asset-lite corporation in business school, where he was ranked near the top of his class.

What exactly is an asset-lite corporation? To me it is simply a company without assets. A company that fit this model perfectly was BCCI. Anybody remember BCCI (Bank of Crooks and Criminals International)? After it collapsed it was found to have no net asset value at all. There were many reports that many CIA agents had accounts or even investments there. With infinite leverage, an investment there could be highly profitable (for a while!).

Whatever is being taught in business schools these days???!!! To me, it is apparent that they are teaching their students how to set up criminal organizations!!! In consequence, it is hardly surprising to find a lack of ethics in CEO's who were graduates from business schools.

How is this relevant to Worldcom? Simply, I now define WCOM as a genuine asset-lite company!!!

Audit

[magurozushi]

Guess who was their auditor until last May... Andersen. (Bloomberg) However, they claim WCom was wihholding information from them, hum.... Fortunately for your own company, you can't choose Andersen to be your auditor anymore :-)

Re:Audit

[Anonymous Coward]

The reason more Andersen clients seem to have fraudulent books now is that all the companies that used AA now have to switch auditors. The new auditor will not take on any problems that the old auditor agreed to, so the company has to fess up.

Doesn't mean the other auditors haven't let the same practices happen, just that they aren't going to force a company to fess up to something they themselves already blessed.

Vint Cerf

[hedley]

Poor guy. Here's a guy who really helped invent the internet and look at the house around him. I never really understood that whole Generation d business, ad's were of people racing around on scooters, struck me then that they were due for a reality check.

Well I certainly don't need to see Vint's resume :)

Re:Vint Cerf

[Anonymous Coward]

That poem may be offtopic, but if I could I'd still give it a '+1, Fucking Beautiful.'

Re:25 of 29 biggest telecom companies will go bye-

[CanadaDave]

As the original poster, I have to agree with you, that the car analogy does work, because it is so simple. The pattern here is an age old one, and that is that eventually as certain growing industries mature they eventually turn into just a handful of large companies. This also happened with telco in the late 20th century, which culminated in the break-up of Bell in (I can't remember 70s, 80s?)

Not if you already have a network

[dachshund]

If their equipment is put up for auction, all those competitors out there will have an equal chance to bid up the prices. So it doesn't make sense to say that equipment will go for nearly nothing, allowing huge prices cuts.

Some of the competitors already have working networks. It makes no sense to buy a nationwide network or the equipment to operate it if you've already got one of your own. This really sucks for companies that have actually shouldered the cost of building and maintaining these networks, because now some competitor is going to come along and slaughter them.

The carriers will have to drop their prices below the break-even point, and there will be further layoffs and maybe even bankruptcies. And as the industry contracts, competition disappears and the consumer eventually pays for any short term benefits he/she may may have enjoyed.

Re:Not if you already have a network

[Anonymous Coward]

An article in the NY Times a few days ago warned a chain-reaction meltdown was imminent in telecom. As companies go bankrupt, their equipment goes on the market and puts the screws to companies that are still swimming in debt. At the same time, the suppliers see their market dry up.

The article said 24 of the 29 largest telecom companies in the US are at risk of bankruptcy in the next few months. Investors were quoted as saying that the best thing to do now is just flush the system as quickly as possible and just scrap some of the unnecessary networks.

The dot com meltdown destroyed $150 B in shareholder value, but the telecom meltdown has destroyed more than $2000 B. This is what happens when the fed pushes interest rates too low.

What to do when my equipement is in co-location.

[Anonymous Coward]

I would be interested to know what happens to my equipements/contracts/due money to worldcom after they declare bankrupsy ? I'm in co-location at their Montreal facility and have well over $20 000 worth of equipements so if this is true I'm in deep shit..

addendum

[Anonymous Coward]

The real war here is going to be between the RBOCs (Verizon, etc.) and the Long Distance companies. Thanks to the mess that is telecom regulation, the RBOCs are pushing into the long distance/data market while the LD companies are mostly still shut out of the local market and bleeding. A WCOM bankructcy will exacerbate the current situation, and quite possibly bankrupt more existing Long Distance companies.

The end result will be a lot more like the old Ma Bell than anything we've known in the last 15 years.

Re:addendum

[Anonymous Coward]

Worldcom is too big to fall apart. If they do file bankruptcy it would be for reorganization. This is a difficult storm, to be sure, but not one that cannot be weathered. If someone is smart enough to buy Worldcom, it will not go in bits and pieces - it will be bought as a company that has the network to handle voice, date and internet better than most.

Re:addendum

[Anonymous Coward]

Yeah, and it'll belong to Verizon or one of the other RBOCs. Who will then use their cheaply acquired goods and local monopoly as a cash machine to plow down more Long Distance companies. Dominos.

VA LINUX was used as an example in that report

[Anonymous Coward]

VA LINUX was used as an example in the report, because the VALINUX IPO was a huge rip-off. What did CMDRTACO know and when did he know it??!

Re:VA LINUX was used as an example in that report

[Anonymous Coward]

Umm, everyone knows that he's just a patsy.

MOD PARENT DOWN

[Fastball]

What I wouldn't do to be able to take the money deducted from my paycheck in the name of Social Security and 1) put it in a savings account, 2) invest it, or 3) a combination thereof. I would clearly be better off. Instead, my government is getting off on me all of my natural working life.

At some point in the not too distance future, I will be at odds with my government and its eighty-year grandfather clause. Maybe I'll try and take a case before the Supreme Court and tear it all down.

Until then, there is one rule we all can live by. Do not trust any one entity with all of your cash, resources, etc. Not the federal government. Not a multinational. Not even your local bank.

On another page I jus saw was the headline...

[bubblegoose]

...WorldCom Finds $3.8 Billion Error.

Too bad for WorldCom it wasn't the old "Community Chest" card reading "Bank error in your favor. Collect $3.8 Billion dollars"

Re:On another page I jus saw was the headline...

[Tackhead]

> On another page I just saw was the headline...
> ...WorldCom Finds $3.8 Billion Error.

What the fuck? "Error?" Who the fuck writes this crap?

Mars Observer overflies Valles Marineris. Finds "ditch".

Re:On another page I jus saw was the headline...

[SubtleNuance]

What? Do you think that the Corporate Media is going to start calling a spade a spade? If they reporter tries to submit "WorldCom Execs Comit $3.8BFraud - Is Corporate America a Complete House of Cards?" or somesuch, their boss' would get a call right quick from someone who Golfs with those criminals.

Its self-censorship (direct censorship?) in the age of Corporate Media.

Take a look at the Corporate Relationships between the Rest of the World and the Media companies...

Re:On another page I jus saw was the headline...

[Tackhead]

> Do you think that the Corporate Media is going to start calling a spade a spade? If they reporter tries to submit "WorldCom Execs Comit $3.8BFraud - Is Corporate America a Complete House of Cards?" or somesuch, their boss' would get a call right quick from someone who Golfs with those criminals.
>
> Its self-censorship (direct censorship?) in the age of Corporate Media.
>
> Take a look at the Corporate Relationships between the Rest of the World and the Media companies...

While I was merely poking fun at WCOM's spin doctors and their attempt to mask what appears to be massive fraud as innocent error, it appears you took me too seriously.

So I'll return the favor. In answer to your question -- as a matter of fact...

Reuters Business Report: WorldCom Shares Sink After Fraud Report

Dow Jones Business News: CNBC sources report "massive fraud" at Worldcom

CBS Marketwatch: WorldCom fraud shreds stock.

...yes. All reports from last night, within an hour of the release.

Take a look at the complete absence of any relationship between Noam Chomsky's rhetoric and what anyone can see for him or herself in the business press every day.

blame corporate law

[TheSHAD0W]

A large part of the problem of fraud within corporations is because of the construct of a corporation itself. A corporation is a fictitious person who bears the responsibility of (nearly) all acts the corporation takes; stockholders can't be held liable. As a result, stockholders will constantly push towards the profit while ignoring the means of generating that income.

'20's auto market probably an excellent analogy

[fw3]

The comparison to the auto industry doesn't work. Back when there were 50 auto companies there were a lot fewer people...

I suggest you look up 'Kondratiev cycle technology'. Jay Forrester (inventor of magnetic-core memory), studied this at MIT/Sloan school and determined that the a long-term economic cycle develops due to the 'self-ordering' nature of capital equipment.

Basically Forrester's group found evidence for the following feedback loop: Early in the deployment of any technology there is a scarcity of capital. Capital equipment is expensive, and early investments involve high degrees of risk accompanied by high profits in a given technology sector. That in turn brings investment in the businesses developing this capital. However, a large part of this capital is used in the development of the capital itself (i.e. IT tends to need advanced hardware and software to develop the bleeding-edge new hardware and software for actual end-use).

Thus the 'buildup phase' of new technology creates a high demand (for both the acutal equipment and the stock of the companies that make it). At some point, however the generation of this new (and expensive) equipment (or software) exceeds the actual (end-user) demand. When this happens the high profit margins that were being realized during the build-up phase disappear quite rapidly, the investment-value follows (crashing stock prices) and the investment money looks for other places. See this article

Sound familiar? Whether or not you buy into the economic details, this is one of the behaviors seen in economics. The inflated acquisition prices mentioned are the direct result of this effect.

Because sure people make stupid mistakes even (especially?) with billion dollar transactions. But the funny thing about the stock market is that the money doesn't ever go away. Whenever someone loses in the market, someone else has made a profit.

And yes it sucks when the players break the rules but especially on the financial rules the market punishes you very hard. I worked for a biotech firm that was growing well, showing solid net earnings ca $300m on $2b sales, a 30:1 p/e ratio. Our japan division was found to have been moving inventories to the tune of changing the sales #'s by $50m. This lie, accounting for only 2.5% caused a nearly 50% drop in stock price and a (justified) shareholders lawsuit.

Whenever someone fsck's with the rules of the game (fixing the books, insider trading, breaking anti-trust rules, whatever), real people get hurt and we have SEC, IRS etc to try and keep up with the process. MS imo is an excellent example of how a determined and unscrupulous competitor can harm while evading the systems controls(sic).

I'm just thanking my stars that (so far) the politicians havent fscked up like they did after the '29 stock market crash. The US enacted protectionist trade tarrifs which effectively were the first blow in killing off the *world* economy.

Post-sept-11'th fears and RIAA / DMCA idiocies aside, at least across a several bumpy decades our boneheads in Washington, the EU, etc at least so far have managed not to fsck up. They still have opportunities to snatch defeat from the waiting hands of victory, but so far it could be a whole lot worse I think.

Re:'20's auto market probably an excellent analogy

[simpl3x]

of course the auto industry was wiped out by the depression also. there were many makes of cars with a $10,000 sticker in the 20's, and a rolls wasn't even the top of the line. of course many didn't survive. but, it took another 30-40 years for consolidation. hudson, studebaker... my grandfather worked for tucker, though they didn't even make it off the ground.

Re:'20's auto market probably an excellent analogy

[analog_line]

I'm just thanking my stars that (so far) the politicians havent fscked up like they did after the '29 stock market crash. The US enacted protectionist trade tarrifs which effectively were the first blow in killing off the *world* economy.

I guess you haven't noticed the trade war brewing over the imposition of steel tarrifs and heavily increased farm subsidies that the current administration signed into law? The Bush administration has a good track recordn at breaking their own promises with regard to trade policy.

Re:'20's auto market probably an excellent analogy

[Guppy06]

"I'm just thanking my stars that (so far) the politicians havent fscked up like they did after the '29 stock market crash. The US enacted protectionist trade tarrifs which effectively were the first blow in killing off the *world* economy."

I think this is the part that scares me the most, or at least that we have that much effect on the world economy. We have terrorist attacks in the past few months and the continuing threat of more attacks in the near future. This during the whole dot-com bubble bursting and tech companies taking big hits. Then we have Enron and Worldcomm and who know what else on the horizon. Not to mention the nose dive the US dollar is taking on the currency markets. And who gets hit hardest?

Europe and Japan.

Japan, already in the middle of a bank crisis they're too proud to admit to, is actively trying to prop the dollar up. The EU, who have been trying to bring the Euro to parity with the dollar, find themselves the victim of the ancient curse "May you get what you want." Foreign investors watch the value of their dollar investments go down while US exporters get nice perks like making money in currency exchange rates (even for small-time eBay shmucks like me). And I haven't even touched upon what this can do to China, who pretty much rely on their ability to export cheap labor. The only thing I'm not sure about is what this all means to those countries who have pegged their currencies to the dollar or have abandoned their currency for the dollar outright.

The scary news is that the US has some difficult economic times ahead of us. The sacrier news is that things will still probably be better here than anywhere else. The scariest news is that we'll probably come out of this even bigger than we were before.

Re:'20's auto market probably an excellent analogy

[fw3]

I think this is the part that scares me the most

I couldn't agree more, and I was unaware of the steel and agriculture issues, but trade negotiations in those areas are also pretty standard stuff, you'll not I also indicated my concern:
>> They still have opportunities to snatch defeat from the waiting hands of victory,

haven't even touched upon what this can do to China

Asia today trades more with itself than the west. That is a sign of a long-term shift to a more healthy economy. The only thing I think we can count on is the outcomes aren't easy to guage / guess. The world economy is a complex beast and will pretty well do what it wants. Most of the world understands this today (which is why OPEC hasn't tried to push oil prices to where they hurt the overall economy as happened in the '70s)

The scariest news is that we'll probably come out of this even bigger

I wouldn't bet on that (either way), Asia has good opportunities to realize real growth, but anyhow I'm not an economist / don't play one on tv :-). Dunno what's coming, but I expect it to be interesting

Re:'20's auto market probably an excellent analogy

[kootch]

and how are these subsidies any different than the HUGE farm subsidies that the EU pays out to the farmers of their member countries?

Re:'20's auto market probably an excellent analogy

[mrbnsn]

China maintains a soft peg against the dollar, so the RMB Yuan has traded at approximately 8.28 to the dollar for the last eight years, plus or minus a percent or so.

Thus, there is no net benefit or detriment to a low dollar in U.S.-China trade.

(And no, this is not accidental.)

Re:'20's auto market probably an excellent analogy

[dmiller]

I'm just thanking my stars that (so far) the politicians havent fscked up like they did after the '29 stock market crash. The US enacted protectionist trade tarrifs which effectively were the first blow in killing off the *world* economy.

You had better tell Bush that - the US has just instituted steel tariffs and upped farm subsidies to insane levels.

Re:'20's auto market probably an excellent analogy

[nelsonal]

Opec mostly isn't pushing prices up for a few other reasons
1. Russia has pretty significant capacity that they would love to turn up.
2. Its pretty easy to increase supply in a year or so, as owners of wells increase production. Opec tries to minimize this because it causes those $10/barrel swings that are bad for everyone selling oil.
3. The members largely cheat. There are a few member countries that hold to their quotas pretty well, but most of them cheat like crazy. The most recent estimate I saw, was that OPEC is producing 20% more than their quotas. This is pretty common among cartels since its in their intrest to do so individually. The old prisoner's dilemna explains why fairly well, even if only in a single term game.

Re:'20's auto market probably an excellent analogy

[analog_line]

They're no different. Those subsidies are just as bad. A President who claims to support the free market, then raises subsidies on farm products, and impose a new tarrif, isn't advancing the cause. It just lets the rest of the world get away with the same things. The administration can talk a good line about free trade, but no one cares, because they've seen that the administration doesn't really believe what they're preaching.

Re:'20's auto market probably an excellent analogy

[MtViewGuy]

(which is why OPEC hasn't tried to push oil prices to where they hurt the overall economy as happened in the '70s)

The reason why OPEC can't push oil prices higher is because they forgot a basic rule of microeconomics--cartels don't last. With Mexico and Norway (both major oil producers outside the reach of OPEC) increasing production and with the massive oil reserves of the former Soviet Union now available to the West, OPEC's pricing leverage has dropped drastically, to say the least.

Re:'20's auto market probably an excellent analogy

[coastwalker]

(If its obvious that the telecom market is going to end up with only a few players - why has the market poured so much cash into the value of telecom shares. Something has gone seriously wrong here).

Guppy06 makes an interesting point about the effect of US trading conditions on the world markets. I as a European see no difference between the US market and the European one. The business I work for sells into the US market amongst others, the industry I work for does its accounting in US$. I live in a state which politcally may as well be in the US. The only difference is that my 'local government' has slightly more leeway than one in the US. On the other hand I personaly have absolutely no representation with the leadership of the US.

So much for the politics of the 'free world' - makes you wonder where its all going to end up...

Re:'20's auto market probably an excellent analogy

[Free Bird]

I live in Europe and I can tell you that I'm not getting hit. Now I can finally buy American products at an acceptable price, while the reduced competition from American companies helps our companies grow. No problem at all!

Re:'20's auto market probably an excellent analogy

[Anonymous Coward]

Well, to take the part of "Bush's Advocate" for a moment, if the US had refused to put in steel tariffs, with the industry crying for them, there would probably have been a huge backlash against free trade. With the unions and globalization protesters on the same side, you'd probably see a Democrat opposed to free trade winning the presidential primary, and even if he or she weren't elected, Bush would be forced to hamper free trade to defend himself. In the long run, by reducing peoples' anxiety about free trade, this tariff may actually be helpful.

(The real reason of course was probably raw politics, but oh well.)

Re:'20's auto market probably an excellent analogy

[Anonymous Coward]

You can blame the steel on Bush, but the farm subsidies are Congress' fault. (Not any particular party or congressmen... just congress in general.)

Re:'20's auto market probably an excellent analogy

[Anonymous Coward]

Also the US (and maybe other nations?) has a "strategic petroleum reserve" which makes short-term attempts to boost prices unprofitable.

Re:'20's auto market probably an excellent analogy

[Guppy06]

"Now I can finally buy American products at an acceptable price, while the reduced competition from American companies helps our companies grow."

Those two points of yours are mutually exclusive. Yes, you will be able to buy US goods at a better price, but that better price will likely undercut European manufacturers and bring more business to US exporters.

currency markets != stock markets != goods & services markets. The currency market is probably the most volatile you can find, and while the price of a dollar may be going down, the prices of goods and services marked in dollars are much more static and will stay at the same levels in relation to each other. Next week $0.25 may not get me 0.25 but it will still buy me a pack of gum until at least the end of the fiscal quarter.

Let's say I'm a US exporter selling widgest at $1.00 each. You want to buy some, and the exchange rates of the day are $1.00 = 1.00 so you send me 1.00 and get your widget. I then take the 1.00 and send it to my US bank, who then puts into the EU banking network and by the time the payment gets processed the exchange rates have changed to 1.00 = $1.10 and I just "made" a dime.

I may not have technically made money but, as I said before, things priced in US dollars go down along with the value of a dollar. The cost of me buying a widget from my wholesaler was $0.75 last week, $0.75 this week and it will be $0.75 next week, while in terms of euros it started at 0.75 and dropped down to about 0.63 in that same time period.

But even if I don't know the dollar will be slipping again next week, there's no reason (at least not in the short term) for me as a widgets seller to prop up my prices to compensate for the falling dollar because my wholesalers aren't raising their prices. And they're steady because the widget factory prices go down with the dollar, and so on and so forth all the way back to the US widgetonium mines.

And since the prices from US exporters remain static with the dollar (not the euro), those prices will undercut the local EU suppliers who can't afford to lower their prices. And since the WTO frowns upon tariffs and such, it will be the EU companies that start taking losses, not the US ones.

This is why the Japanese government is in a mad scramble to prop up the dollar while Washington is more than comfortable with cooling their heels for a while.

Re:'20's auto market probably an excellent analogy

[Lozzer]

Because sure people make stupid mistakes even (especially?) with billion dollar transactions. But the funny thing about the stock market is that the money doesn't ever go away. Whenever someone loses in the market, someone else has made a profit.

Economics is not a zero sum game, the stock market especially so. New stocks arrive, companies go bankrupt, the stocks disappear. Its not a closed environment

Generation d(ude where's the money)

[stinkydog]

A new generation is emerging. A generation unlike any that has preceded it-- defined not by an age, but rather an attitude. It's the first generation characterized not just by people, but by a whole new way of thinking. It's the digital generation, or as we call it at WorldCom, generation d.

WorldCom is proud to offer its employees a full range of comprehensive benefits.

Additionally, employees can take advantage of a corporate 401K plan, investing up to 20% of their salaries in a variety of fund options. As an added perk, WorldCom matches 100% of an employee's contribution to the 401k plan, up to 5% of the employee's salary, after only one year of employment. Planning for the future is of the utmost importance, so WorldCom makes this investment easy for every full-time employee. And with WorldCom's online employee tools, registration and management of these benefits are easy -- yet another example of our forward-thinking, next-generation company.

Hope you didn't buy WC stock!

SD

Re:Generation d(ude where's the money)

[Drachemorder]

"Hope you didn't buy WC stock!" I didn't. Not much, anyway. (I work for them, and I did NOT put much of my 401K money into WCOM stock. I thank God every day for that little piece of foresight.)

Re:Generation d(ude where's the money)

[Anonymous Coward]

A generation getting rammed up the ass by its employers. A 401k is a poor substitute for a retirement plan.

Reich, not Cheney

[Anonymous Coward]

Enron got more mileage from Clinton hero Robert Reich than they got from Cheney.

When the shit hit the fan, the first call Enron made was to Reich to help bail them out.

Remember, Enron had to restate financials back to 1996 or 1997 .

That's Clinton-Gore (big surprise there - think there's any silverware left in the White House from pre-Jan 2001?)

Re: Worldcom and UUNET "may just go away now"

[markwelch]

Worldcom is MCI and UUNET. MCI is the first of the competitive long distance companies and the second largest telecom. UUNET is the first commercial ISP and one of the largest. Both may just go away now.

Actually, in one key way, UUNET is already gone. UUNET has always been one of the main channels for spam broadcasting (maybe because they were first, maybe because they were biggest, maybe because their sales staff accepted anyone (including previously-terminated customers), maybe because their abuse department was slow, I'm not sure).

But during the past few months, I've seen no responsive action to abuse and spamming complaints. It appears that Worldcom may simply have closed down the abuse department.

At one point, I researched (lots of tracerts) and then concluded that more than 90% of the spam I get, comes from servers whose internet connections are through UUNET.

If I could just shut off the pipe to block everything coming from any UUNET/Alter.net/Worldcom customer, I'd do it. I think that single step would eliminate 90% of incoming spam and probably only a handful of legitimate emails.

Anderson needs to be closed down

[Anonymous Coward]

All the money Anderson made should be distributed to people they hurt. The government should cease all of anderson's assets already. Geez!

Wow...

[coene]

$4B in 5Q? I'm impressed.

valuation

[simpl3x]

and what might be the actual valuation of the current market? particularly when p/e ratios are still high. even scarier!

A lot of people saw this coming...

[IroygbivU]

I'm going to go a little off topic here, but this is my personal analysis of why we are seeing so many large companies like WorldCom collapsing in on their own corruption.

We all know that power and money doesn't circulate within a vacuum. Everything in the world is tied together, so that when one force of influence diminishes another will rise to take its place. The five main players I see in the modern world economy are - The governments, big business, small business, unions, and workers/individual consumers. The dynamics and fairness/wealth distribution of an economy are highest when there is a balance of influence between each of those forces. Historically, they are rarely balanced (and in some countries they are completely imbalanced), but I think the opportunities to correct it are greater than ever now.

As you may guess, I believe that the weight of influence in the American economy (in a concerted push since the early 80's) has tipped to predominantly favour big business and big government/military. Since America's economy is twice the size of number 2 - Japan - it controls global economic policy and as such is creating mirror economies to its own around the world. This imbalance is spreading like an epidemic around the world, seriously affecting other countries who model themselves off America - like my own country Australia.

So, what can be done about it? It seems a rebalancing isn't going to happen on its own, or at least not until the current situation degenerates to a point where violent revolution is needed to fix the problem. I guess there's several paths that could be chosen but here are two off the top of my head. One - allow the current consolidation of small and medium sized business into large/uber businesses to continue but restore power to the unions. Two - shift all laws that favour big business to favour small business instead.

Personally, I favour the latter. A society run by small business is far less likely to have organised and entrenched corruption - eg Would Dick Cheney have been swayed by the CEO of a company that controlled only one or two power stations? What benefit would a government get by helping out small companies that can't contribute many campaign funds and have little influence around the nation?

Anyhow, I think I'll cut the sermon off here. I think +5 troll and +5 offtopic is a good enough effort for today!

Re:A lot of people saw this coming...

[rsborg]

I wish I had mod points to mod this up, so instead, I'll add you as a friend.

Comment removed

[account_deleted]

Comment removed based on user account deletion

They're GOING TO START Laying people off tomorrow

[ramdac]

I've heard 16,000 people will be gone starting wednesday.....not all at once.....but they will start releasing people.

Destroying Tulsa OK economy

[lonesome phreak]

This, combined with the fallout over Williams Communications may be the last nail in the coffin for Tulsa. WCOM has nearly 1000 employees at their Cherokee plant. So much of our economy depends on them, that without them we are seriously screwed.

Re:Destroying Tulsa OK economy

[night_flyer]

I heard on the news tonight that upwards of 900 may be laid off sometime before the end of the week (900 "boxes" are prepared), previously the numbers were between 300-600.

Im glad I got out when I did, but I still have a lot of friends still there that this will affect.

Terrorism?!

[Bistronaut]

<rant>

I'm sick and tired of people trying to relate everything bad to terrorism. I highly doubt that this MCI guy was deliberately sabotaging anything, but that's not even the point. "Terrorism" is when you do bad things to inspire terror. Terror is a key mechanism in terrorism! If you, say, sabotage the US economy slowly by eroding investor trust over the course of months or years, that's surely harming us, but it's not terrorism!

Here's an example of some very effective terrorism: the recent "dirty bomb" thing. It's effective because the average American knows squat about radiation. Americans are so stupid that they won't buy irradiated food because they think that it's radioactive! The effect is compounded by TV "journalists" who know just as little, but are more than happy to trumpet the term "dirty bomb" over the airwaves for at least a week. And our beautiful executive branch is so eager to trumpet their success in foiling the plot that they play up the danger such a device poses in stead of spreading some usefull information about how radioactive materials work. Hello!? I bet that the actual terrorists are scratching their heads, wondering if they should retire and just let the US gov. do all their work instead.

</rant>

Re:Terrorism?!

[Danse]

Yeah... it was pretty funny how the tv news shows whipped out the old mushroom cloud pictures to run along with the dirty bomb story. Yeah, they have a clue.

Re:Terrorism?!

[Locke!Erasmus]

I think your take on the the lack of terrorism as a motiviation in this case is correct, but I also think telstar makes a valid point.

I agree with you to an extent that terror is a principle component of terrorism, but individuals wishing to do harm to this country could do just as much harm by disrupting our economy or other aspects of our lives. IIRC, that was one of their chief reasons for choosing the WTC in the Sept. 11 attacks.

I also foresee in the future that said individuals might try to do nasty things to our economic institutions. While we don't have to live in fear of getting on the train to go to work (yet), a punch in the wallet would be almost as unpleasant for many of us.

Re:Terrorism?!

[sg3000]

> The effect is compounded by TV "journalists" who
> know just as little, but are more than happy to trumpet
> the term "dirty bomb" over the airwaves for at least a
> week.

You know it's really bad when The Daily Show, John Stewart's political satire show on Comedy Central, was more reasonable than the real news shows. Stewart actually ranted a couple of times about how the real media was scaring people unnecessarily with overblown reports of dirty bombs.

Re:Terrorism?!

[Anonymous Coward]

...but individuals wishing to do harm to this country could do just as much harm by disrupting our economy or other aspects of our lives. IIRC, that was one of their chief reasons for choosing the WTC in the Sept. 11 attacks.

And I thought it was because they were huge easy targets of significant symbolism.

Re:Terrorism?!

[5KVGhost]

Please think, don't rant.

There's far more to the threat of terrorism than the destructive acts themselves. Terrorist organizations need money to support their operations and they have very complex means in place to gather those funds. Terrorists have often subverted legitimate governments, organizations and companies in order to benefit financially; it's just like organized crime, only with somewhat different goals.

So, if a known terrorist or terrorist organization orchestrates a financial crisis in order to make a target more vulnerable to other more overt terrorist activies then it's still terrorism. If they raise money by committing financial fraud and diverting the profits to fund acts of terror, then it's also legitimately called terrorism.

I think it's unlikely that the current accounting and financial woes of Wall Street have anything to do with terrorist organizations. But narrowly defining terrorism as "things that scare people" is missing a rather big part of the problem.

Re:Terrorism?!

[jafac]

And just what investor with $5000 to put into the market isn't terrorized by hearing that:
1) companies lie about their balance sheets
2) investment firms cheerlead simply to sell stocks so their bottom lines look better
3) accounting firms destroy evidence of wrongdoing for their clients
4) government regulation and oversight of these practices is very weak to an almost complicit level

Who isn't terrorized by that?

In fact - compare Arafat's complicity with Hamas' terrorist acts - and draw an analogy with the Bush administration's compliance to Enron's price fixing, manufacturing of an energy crisis, and cooking the books, and you have (in my opinion) a recipe for GW Bush being given a one-way ticket to Guantanamo Bay in an Orange Jumpsuit.
Impeachment nothing. This is fucking high treason.

Re:Terrorism?!

[Anonymous Coward]

How can he explain what it is when he still pronounces 'nuclear' as "new-que-ler", instead of the correct pronunciation "new-clie-er".

Re:An even though.. C'mon 3.6B is a dime in BG's $

[Anonymous Coward]

And this is going to bring down the market?

There's always a reason...

[TheNarrator]

Professional short sellers LOVE to float bad news stories right at the ex-Dividend date (tomorrow for MCIT, WCOM's "Tracking stock").

The stock will automatically drop $.60 tomorrow at the open due to its dividend (MCIT) payout to shareholders of $.60 being set after the bell closed today.

That's a big, planned drop for a stock that already trades under $2 per share. Now toss in a little bad news, some fear-mongering, stir, and you've got yourself a panic selloff in MCIT and WCOM shares.

And someone out there will be waiting for their chance to buy a long distance company on the cheap, with Billions in annual earnings and hundreds of thousands of established, loyal customers.

Remember, when you want to buy a bargain, spread the bad news to coincide with the Ex-Dividend date...

What we did at my company

[Bistronaut]

If you have it in your area, get Roadrunner Business Class. We looked into a Frac. T1 from WorldCom, and Roadrunner was faster and cost half as much. The "Business Class" is seperate from the residential, and much faster (not that res. is bad - it's what I'm on). Of course, T1 costs are related to your location, so YMMV.

Re:What we did at my company

[Xenophon Fenderson,]

I'm also a happy Road Runner Commercial Services (RRCS) customer, though I am pretty small (a hobbyist). "Real" companies use T1's for more than just data. In fact, a T1 is sometimes implemented to save money on long distance calls, with inter-office data (or Internet connectivity) as an afterthought. In this regards, RRCS doesn't really compete.

Re: Worldcom and UUNET "may just go away now"

[netcoyote]

Your full of shit. Post some email headers.

Re:CEO Stock Options, Accounting.... (PBS Frontlin

[Anonymous Coward]

If you don't like it move to Fidel's island paradise, ya communist! GREED IS GOOD!

So, the lobotomy was a complete success I take it. . ?

Define "fail"

[BeBoxer]

i enjoy seeing them (the unsavory executives) personally fail

Except that the exec's rarely if ever "fail" by any common sense standard. They almost never end up in jail (where they belong), and invariably walk away with more money then you, me, and a hundred of our best friends will make in a lifetime. If failure is a bum resume and ten million bucks in the bank, I'll take that over a nice resume and a mortgage any day.

Re:Define "fail"

[ledgeerama]

They almost never end up in jail (where they belong), and invariably walk away with more money then you, me, and a hundred of our best friends will make in a lifetime.

Don't forget that they usually walk straight into another high paying job, even though they are shown to be crooks and usually incompetent at the same time.

Re:Define "fail"

[SubtleNuance]

When the exec's compensation is based (mostly) on stock options (and stock price) is it any wonder they lie/cheat and steal during their time only to protect the 'paper wealth' of the company; and how it looks to Wallstreet?

I wonder just how much more of USA corporate giants arent doing this exact same thing...

Re:Define "fail"

[mirnav]

Then you have already failed, in my book.

Re:Define "fail"

[Anonymous Coward]

B. Ebbers, the ex CEO of worldcom, is getting a $1.5 million a year pension for the rest of his life. I'll take that and a bum resume any day. Maybe us working-class people need to do a little more political activism.

Re:Define "fail"

[Anonymous Coward]

Not always...

An exec at one of my previous employer was sanctioned by the SEC and prevented from serving in an executive capacity at any company for 2 years. That, along with a $250k fine was his punishment for mis-stating earnings which floated the stock price until he could unload about $30m of his own shares.

Thank god we have the SEC to keep these guys in check! I'm sure, based on that punishment, he'll never think of doing anything like it ever again.

Re:25 of 29 biggest telecom companies will go bye-

[Anonymous Coward]

"a lack of intellectual leadership" = politically correct way of saying "a total fucking moron"

I however.....

[sawilson]

was one of those people laid off. I can remember chuckling a little when I learned that my severance package was "tied up in court" but that I'd see it down the road. Good thing I've heard that one before and knew I'd have a better chance of seeing a stable microsoft OS in my lifetime. The worst part about this one is how things were handled. The long time employees were still talking about how the Rigas's would save the day even when word of their 3.6 billion dollar theft from company coffers hit the news. Most of them were completely convinced that everything would be alright. Given the scope of this disaster, ABS knew full well it was going to happen when they hired me, and outright lied to me about how stable the company was and where it was headed. They lied to at least 5 new people in the department I joined also. For those of you that don't know, Adelphia Corporate is located in Coudersport, PA. It's a quaint little northern Pennsylvania town about 30 miles from the NY border. Population 2500. About 400 houses, homes and small businesses. A McDonalds, A Subway, oh and a 9 billion dollar telecommunications company. It's also 45 miles from NOTHING AT ALL. The makings for a great Stephen King novel. Tons of people displaced by the tech decline risked everything to move to the middle of nowhere for half the pay. When the layoffs came, they got rid of all the new people. The idea being to try to save some face in the community by keeping the people that were born and raised in Coudersport. Some of the new folk that were laid off had bought houses there. I feel for those people the most. As someone that's used to getting company's shot out from under me, I rented. My bad habit of eavesdropping on upper management let me know two weeks ahead of time that I'd be gone. I was actually relieved to be getting off the sinking ship early. Now I'm enjoying a very large unemployment check that Adelphia has to pay for. I figure I'll suck about 25 grand out of them then get a job. For the time being I'm kicking back, sipping drinks, and watching cable. I have no bills, so I have no worries. It's good to be prepared. I feel the most for the town of Coudersport. It really is a nice place. Absolutely beautiful. It was nice driving a mile to work and worrying more about hitting a deer than traffic or having my stereo stolen. I really didn't feel the need to lock my door. Nobody there does. No crime, no drug problem, great school, perfect place to start a family. The American Dream. The local economy there is centered around Adelphia, and ABS. The Rigas's own at least 90 percent of the town. I saw massive evidence that they truly love their small northern mountian town. They invested a fortune (granted, it was probably stolen money) trying to save it from tumbleweeds. They built a multi-million dollar data center in the middle of nowhere. They built their corporate headquarters in that same middle of nowhere. They employed the whole town, and gave loans to many townspeople. It's sad to know that within a few years, Coudersport will be an empty zipcode. There will be nothing there to support the town. The Rigas's will no doubt move to Buffalo or Phili. The datacenter will stand empty. The people left in town will move to Wellsville or Bradford (where they make Zippo Lighters) and seek new employment. Imagine a small town where a military base has been closed, and multiply the effect by 3. That's what it's going to be like. Slow motion Hiroshima with no boom. The only positive I can think of is the demise of the corrupt local goverment there. Since dead towns don't have courts, the world will be slightly better once the coudy courthouse is empty. I'd like to give a shout out to those left behind in the UNIX dept. I hope yall are hanging in there, and finding better jobs (If you all haven't been laid off already). You were all really great people (ScottU sucks though =P ). Make sure you file for unemployment at:

http://www.dli.state.pa.us

immediately after you are laid off. I can't get the year of my life back that was stolen from me by Adelphia, but I can sure as hell get every last cent I can. Good Luck!

Re:I however.....

[Anonymous Coward]

Enter. Press the Enter key, good grief!

Looks like the World(com) needs a new leader!

[drainbramage]

I hear that great savior of telecoms and US jobs,
the one and only Fearless Joe Nachio is available.

If he can tear himself away from his family and friends.

Lesson number one

[Goonie]

Go tell that to the people who bought mutual funds with those stocks

Yes, but those people in those mutual funds have been soaking up windfall profits for the last decade.

If you want your money to be safe, go stick it in Citibank (or your local equivalent) and earn next-to-no interest. If you want to make better returns, go invest in a variety of blue-chips (and accept that one or two of them might go bust every so often, but the cumulative return will be higher). If you want to make big gains but are prepared to lose big, go play with derivatives or invest in startups.

Every time you invest in the stock market, or get somebody else to do it for you, there's a risk of losing money. I've had some money in a mutual fund for the past five years (in Australia). Some quarters, the net value goes backwards signifcantly. Overall, my investment has doubled in value, and even taking inflation into account, I've made a good gain. But it might halve in value tomorrow. That's the risk you take.

google sets

[AtariDatacenter]

Perhaps we should employ Google Sets to find your answer? (scary thought)

Re:Google Sets

[bluephone]

Hmm. Add in Global Crossing and we have a pattern...

Re:Google Sets

[Anonymous Coward]

Bwahaha!

That is one heck of a list. Too bad since the list has Google among the ranks.

Re:Google Sets

[Anonymous Coward]

Unlike every other tech company on the planet. MS has occasionally /under/ reported earnings for a quarter. I wouldn't put them in that same list. Unless I was a total fscking moron. Then I would.

Democrats are just as corrupt as Republicans

[Anonymous Coward]

Both Republicans and Democrats are corrupt and are focused on destroying our nation. They are more of a threat than any terrorist.

Republicans = Christianity
Democrats = Socialism

Both are dead ideologies. Time for something new!

Telecommunications Implications?

[Gazateer]

Just as a little update... Yahoo Quote puts their stock price in After Hours at $0.20/share now, down 78%.

If Worldcom goes under, what kind of implications will be seen in the telecommunications market? I mean, UUNet is a major backbone provider, MCI is a major LD provider, Digex is a major hosting service. Not to mention the fact that WCOM owns the MAE's.

Could this cause major issues with routing and Internet access in general?

Re:Telecommunications Implications?

[Anonymous Coward]

As a WorldCom employee, I'll have to say YES, yes it will. If by some means AS 701 goes offline, the internet will be in alot of trouble. The things people aren't realizing is just how many important customers our company has. The U.S. government being one of the biggest. And I don't see them just letting our company fall down, many have been talking about either M$ stepping into to buy out the UUNET division (yes, we're still here!) or a possible bailout from the government on our loans (ala Chrysler). We'll have to wait and see what goes down though.

Re:Telecommunications Implications?

[mdouglas]

just to illustrate the importance of AS701, take a look at this graph of AS paths & peering relationships on the internet. take a close look at the very center. i can only hope that uunet is spun back off as an independent isp, because if microsoft buys it we're all doomed. also, someone mod the parent up.

Re:Telecommunications Implications?

[Anonymous Coward]

...many have been talking about either M$ stepping into to buy out the UUNET division...

Jesus Fucking Christ, I'd rather the internet go dark than Microsoft own big pieces of its infrastructure. If this is true, Gates must be creaming his shorts at the thought of having that much more power.

So what have we got here.

[sawilson]

A corporation turned out to be highly corrupt.

Welcome to here (The US of A).

We are nowhere near the top ten in education in the world. Ignorant people are easier to deceive. We have a President that tried very hard to bring back trickle down economics. We have a political system that is a charade comprised of two very powerful political parties that wow us with WWF style antics in the media. We have a media devoted to getting every last dollar from us. We have special interest groups spending insane amounts of money trying to get their opinions heard. We have justice that you have to pay for. Your freedom hinges on how good a lawyer you can afford. We have a populace that for the most part has been dulled into complacency by big macs, mustangs, girls gone wild, and mtv. We have 3 major media outlets. How hard is it to control 3 major media outlets? We have intelligence agencies spying on the populace. We have unfavorable political figures publicly executed on national television. We have a space program going nowhere. We have a whole universe we are ignoring so we can concentrate on the lifestyle we are fed by the 1 percent of the population with all the money and power. Those 1 percent of the population are ensured they'll keep both their money and power because of the laws that have been put in place to protect them. This, to me, is the definition of a virtual reality.

However......... We also have nowhere else to go. We also have the best deal going on this dirtball. I can't blame anyone for ignoring all of this and watching friends reruns. It's all too depressing to actually think about. :)

My $0.02

Re:So what have we got here.

[Anonymous Coward]

And with all this we still have Blacks ( economically lowest social group in US) having higher standart of living than people in Sweden.

"Those 1 percent of the population are ensured they'll keep both their money and power because of the laws that have been put in place to protect them."

Bullshit.
Those 1 percent are basically the best of the best and as such they deserve what they have.
Remember Bill Gates did not inherit these billions ..

Re:So what have we got here.

[sawilson]

Why not do 5 minutes of research and find out who Bill Gates dad is. :) Nothing happens by accident. There are no true cinderella stories my friend. Sorry to burst your bubble.

Re:So what have we got here.

[mpe]

Those 1 percent are basically the best of the best and as such they deserve what they have.
Remember Bill Gates did not inherit these billions ..

Mr Gates has never been a poor man, he comes from a rich family. Also he got his foot in the door with IBM through direct family connections.

Worldcom holdings?

[The G Man]

Okay, could someone please state what companies Worldcom owns/controls/etc? I know of UUNET and MCI, but what other companies?

Re:25 of 29 biggest telecom companies will go bye-

[letxa2000]

There would be no need for any of those 25 telecom companies to go broke if they were run properly -- there's plenty of customers and plenty of demand.

Nah...

Maybe for a few more years, but long-term outlook for telecom companies is dismal. VoIP was a buzz word for awhile but sort of disappeared as the dot com bubble burst. But that's temporary. VoIP will eventually spell the end of traditional "long distance companies." At best these companies will stop providing "LD service" and just provide Internet backbone service--because that service is capable of doing what it does now AND handling our voice calls.

I don't pretend to know exactly how it will shake out... But in 10-15 years, max, we will each have access to a data "port." That port will be our Internet access, cable/content access, and our telephone service. It will be a flat monthly rate (possible exception for PPV), and international long distance will be free.

In an economy and market where I can send a 100MB to virtually anywhere in the world for free, the time for paying some mumber of cents per minute to call that same place in the world is limited.

*sigh*

[Guppy06]

*gesturing wildly towards sig*

Here's a philosophical question for y'all: Who's worse, the CFO who skims a few billion off the top, or the day-traders that are (knowingly or unknowingly) looking for this kind of behavior so they can take their share as well? Are Enron investors outraged at the amoral actions of chief executives, or outraged that their amoral actions lost them money instead of gained?

On the bright side, UUNET going down will take all the associated spammers with them. :)

Insider trading?

[Anonymous Coward]

I noticed from Yahoo! News, that the CFO was fired 48 hours prior to the announcement. WAY too much time between a major action like that, and a public statement. Plenty of room for insider trading, just like we saw in the marketplace for the well-connected to get out of the stock.

Collect call from Martha, will you accept the charges?

Re:Insider trading?

[Anonymous Coward]

You're kidding, right?

Insider trading on a sub-dollar stock? Especially when most people bought it above ten dollars. Um, ok.

A solution

[Anonymous Coward]

Who do you trust more -- government or business? Liberals love the government, Conservatives love business. But I hate them both!

I think we should return to the original constitution and have a confederacy of states instead of a corrupt and unaccountable federal bureaucracy. Also we should not get into any wars unless our country is attacked, and we should not send foreign aid to any country.

As for corporations, well, I like this quote:

"I hope we shall... crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country." --Thomas Jefferson to George Logan, 1816

Re:A solution

[Anonymous Coward]

That's right, we should return to an agrarian economy, just like Jefferson wanted.

Oh, with slaves too.

Moron.

Re:A solution

[snarfer]

I think we should return to the original constitution and have a confederacy of states

You wouldn'thappen to live in the southern United States, by any chance, would you? I got news for you, the South LOST the civil war.

UUNET, freedom, and spam.

[Ungrounded Lightning]

Actually, in one key way, UUNET is already gone. UUNET has always been one of the main channels for spam broadcasting (maybe because they were first, maybe because they were biggest, maybe because their sales staff accepted anyone (including previously-terminated customers), maybe because their abuse department was slow, I'm not sure).

UUNET was around back when the net was forming and the battle was to get people access, not to cut off the abusers. Like Gary Gilmore (sun co-founder, cygnus founder, gnuthian) who runs an open mail relay out of ideology, UUNET would try to give anybody access.

(I believe that at one point you could get an instant UUNET email-via-uucp feed by calling a 900 number and paying by the minute for connect time. I think that's still there for anonymous FTP from their archives.)

Re:UUNET, freedom, and spam.

[kpetruse]

Isn't Gary Gilmore a serial killer? (or rather was, he was executer - hence the Sham 69 song "Gary Gilmore's eyes").

Re:UUNET, freedom, and spam.

[JimPooley]

Isn't Gary Gilmore a serial killer? (or rather was, he was executer - hence the Sham 69 song "Gary Gilmore's eyes").

That wasn't a Sham 69 song. It was by The Adverts.

Re:UUNET, freedom, and spam.

[Spudley]

Isn't Gary Gilmore a serial killer?

And there was me thinking he was the guy who wrote Dungeons & Dragons....

Re:UUNET, freedom, and spam.

[kpetruse]

You're right. I had that srange feeling whilst writing it and it was too early to go traipsing around Google.

That, and I didn't even check my spelling. Really should drink coffee before posting...

Re:UUNET, freedom, and spam.

[Anonymous Coward]

Found this fortune on the bottom of the current page:

Let's do it. -- Gary Gilmore, to his firing squad

What are the odds?

Re:UUNET, freedom, and spam.

[Ungrounded Lightning]

Like Gary Gilmore (sun co-founder, cygnus founder, gnuthian)

ARGH! JOHN Gilmore.

(That's what I get for posting while half-asleep. Sorry, John.)

Yes, they looked profitable in their reports

[Animats]

I run Downside, which crunches on the financial statements companies file with the SEC. We wouldn't have picked Worldcom as doomed, because the numbers they reported to the SEC made them look profitable. And they claimed lots of cash. Fundamental analysis doesn't work when companies lie.

The market, though, bailed out of Worldcom long ago. Look at their chart. Their stock peaked at $60 back in 1999. They dropped below $2 in May 2002. They're down to $0.79 right now. Most of the drop was long before this latest revelation.

idiot

[Anonymous Coward]

you aint ever going to make a dime if you invest at its peak. you will always lose money. so exactly what were you trying to say?

Re:25 of 29 biggest telecom companies will go bye-

[indiigo]

WHat?

What demand?

The dotcom bust is exactly because there is no demand for telecom services that 25 providers can last on. They are ALL bleeding money, and hard. They over-invested in an infrastructure that no longer is around. thousands of EXPENSIVE MILES of fiber lay dormant! Primary ISP's are feeling the heat when they should be rolling in it. SO, no, the money is not rolling in.

ANd excite/@home died because it cost too much per subscriber install to recap the costs.

History

[loraksus]

I saw this article on the net a while back, quite appropriate. Basically a list of the biggest screwups and questionable business practices in the last year or so. Wonderful for getting figures of exec bonuses [?] who drown the companies they work for.
Alas, the /. lameness filter is bitching and moanin about the text file, so here is a link.

http://www.business2.com/articles/mag/0,1640,386 04 , 0.html
It also has a nice commentary on Balmer's monkey dance, with pictures.

This professional short seller is outraged

[mec]

Are Enron investors outraged at the amoral actions of chief executives, or outraged that their amoral actions lost them money instead of

The former.

I make my daily bread by predicting which companies will fail to live up to their hype and then short-selling their stock. I also invest on the long side, but this year, it's a lot easier to find stocks going down than stocks going up.

So I make money by finding the next Enron (I think it's going to be Computer Associates). And I'm outraged by Enron and Worldcom. For the record, I've never had a position in Enron or Worldcom, and I am short CA.

Short sellers are part of the ecosystem of the market that help broom out the hype and corruption. But there is so much corruption now, it's disgusting. I should have to work hard to find a Worldcom, not see clusters of them splashed across a non-financial news site.

When will it end? It ends with capitulation. It ends when a whole fucking Beowulf of these companies collapse at once, in a big crescendo of panic, when everybody and their brother finally pukes up the evil stock, and the questionable stock, and the blue-chips, every damn thing on the market, indiscriminately.

And that's when I can cover all my shorts and pay some reasonable prices for some quality companies that actually make and sell stuff that customers actually buy.

Re:This professional short seller is outraged

[jafac]

(I agree with you re: CA).

what sucks is that there ARE good companies out there with strong financials, and they're now getting the shaft because of these bastards. So even if I'm invested in a GOOD company, I get screwed.

I'd like to thank the members of the academy, and the Ronald Reagan administration and their policies of deregulation free-for-all coming home to roost after 20 years.

Freedom is a nice thing, but only when the free excercise a bit of responsibility and play fair.

Shareholder primacy is the root of all evil

[Malcs]

Read Marjorie Kelly's The Divine Right of Capital and realize just how and why the system is broken: http://www.divinerightofcapital.com

Re:Shareholder primacy is the root of all evil

[Chris Johnson]

Thank you: I've been reading this site literally for hours. It's amazing. That is no exaggeration- she does in fact have a handle on exactly what is wrong, no more and no less.

+1,000,000 informative :D

A particularly impressive page: The Corporation As Feudal Estate. The scholarship and knowledge of historical detail here is awesome. Again, thanks!

Oops, Lost Billion$ Somewhere Around Here

[Peahippo]

Yahoo's headline says "Worldcom Finds $3.8 Bln Error" for this story. Balderdash. It's like saying you misplaced thousands of dollars from your bank account ... you know damn well where such an amount of money is.

But this is just more propaganda to support the behind-the-scenes running of the American Corporate Hegemony. Fraud? Nonsense ... in practical terms "fraud" is "business plan". The CEO, CFO and others all have the same job: lie, cheat and steal in order to support the stock price. The is the Unspoken Rule and I have just broken it by speaking it. I mean, according to Yahoo, WorldCom kept right on trucking with fraud, even after the dot-com bust in 2000/1 (with all that pro-forma nonsense) and Andersen's exposure in 2001: "accounting irregularities [...] included transfers between internal accounts of $3.06 billion in 2001 and $797 million in the first quarter of 2002". They'd still be doing it now if they weren't in the papers about it all.

Do you think Enron/Andersen are bad boys, or just poster children designed to distract you? Did you know that as we speak and read here, the SEC has been quietly gathering updated data on financial statements from many companies, in some sort of "tell us the real numbers and we'll update our records" exchange of confession for forgiveness? While Enron and Andersen are in the spotlight -- as history as shown us many times -- all the other criminal enterprises are busily being whitewashed by your government enforcement agencies.

I hope that increased Enron settlement (announced Tuesday on NPR) is a good one, since it is essentially all the justice that Americans will see from their criminal corporations. [WRY]Maybe next time you'll vote for Nader?[/WRY]

Re:Oops, Lost Billion$ Somewhere Around Here

[jhylkema]

I know, I know, if only Nader had been elected, this would never have happened. Please, spare me this leftist claptrap.

Seems that ol' Ralphie got rich on the very corporations he railed against for years. He who introduced us to "Newt Getting-Rich" has himself gotten rich. But since he's a lefty, it's okay.

And in case you haven't noticed, the market, not the government, is doing very well, thank you, at shaking out these losers. As for the people who lost their money, well, when you invest, you take chances. Just as you people don't want to guarantee EvilMegaCorp a certain level of profit, neither should investors in the stock market.

As for the idiot Naderites, it's time for a civics lesson. I know they don't teach this in the schools anymore, but ours is a two-party system. It is set up that way. Don't believe me? Read our Constitution. Read the Federalist Papers. Only thing Nader accomplished in the last election was handing to George W. Bush (who I am not a terribly big fan of, but he's a far better choice than Bore ever would have been).

Re:Oops, Lost Billion$ Somewhere Around Here

[Peahippo]

Read my posting again and notice the "WRY" markings around my Nader comment. It was made in some jest therefore. However, since you are so inviting -- you luscious, sexy thing you -- I will expand upon the seriousness in my wry comment.

I mentioned Nader since one of the bases of his political philosophy is that corporations are in control of the two-party system; it's not really much about citizens. Corporate supremacy over citizenry is kind of what this is all about -- my statements, WorldCom's frauds, Enron's frauds, and so on (in a list that is getting far too long).

Perhaps Nader's election would have resulted in some fix actions against corporate supremacy. Perhaps not. I didn't know, but was more than willing to find out, long before walking into that voting booth. I had the ideas well worked out and it seemed that Nader and the Green Party were the person and political organization that could address my concerns.

You state that the market is doing very well. This is the usual misconception of the monied middle-class (chances are you are of that class). The innocuous-sounding "shaking out of losers" is resulting in rather steep layoffs, steeper losses of investments, and ultra-mega-steep frauds. I don't call fraud a shakeout -- I call it fraud and as such it should be prosecuted. I told my rep and 2 senators as much in one of my mailings to them. The shakeout was unecessary from the standpoint that: we had regulatory and reporting apparati (sp?) in place, so what the fsck happened?

Concurrently, and entirely compatibly, I do agree with you that one takes chances in investing, often great chances. I have tried and tried to get people to understand that, even with hours of research in a company, you are still gambling by buying its classes of stocks. But the belief of the infallability of the researched investment market is so strong that I just can't make any headway. Today's stock-soaking losers are tomorrow's lead-foot investors ... it's enough to make a grown man gnash his teeth, tear at his clothes, and lament.

It is a bit funny to see you speaking of civics. A "wasted vote" can only be the vote not cast. The two-party system does not own our votes, regardless of designer intent. We are free to start up more parties (and we do) and to divide up elections into more than 2 factions (noting well in that good ol' wry fashion that in many districts there is only ONE faction: the prevailing Dem or Rep party machine that has been in place for generations), thus our system is not actually a 2-party one. (This is kind of along the lines of "if you have liberty, then act free and exercise your liberties".) But 3rd+ parties are weak regardless of their messages and that's just a shame. We have definitive, diverse viewpoints, and modern America has a great many important social and economic questions that deserve some answers. If only we had more willpower to support our own Q&A.

Nader accomplished much in the last election, if you'd care to address things that you'd perhaps prefer not to think about. Like any 3rd+ party, the Greens brought issues through loudspeakers and screens. He showed the appalling abuse of authority by the debates commission. He showed the difficulties of getting on every State's ballot. He showed the rather silly mindset that affects most voters (that is, the 40% who bother to show up at all).

And incidentally, his involvement might have made it quite clear the voting systems that have run for generations in districts are broken, broken, broken! Because votes are rarely close (remember my statement about 1 faction in most districts?), the mechanisms of affirmation and contention are very flawed. For many years, votes would go by the wayside since people did the math and determined that the outcome wouldn't change anyway. Who cared about the propriety of, say, this pile of 1600 votes from district 4 when the winner already had a margin of 30000? But that's not the point of counting votes; all votes should be addressed, so the system can be exercised to expose errors, and if the vote is close there will be no question as to who the victor is. Votes are precious and as close to sacred cows as my secular humanism allows in the pasture.

By the way, in case my statements above are misconstrued as repeating the rather silly "not every vote was counted in Florida" opinion: I believe in handling votes as the "Nuge" (Ted Nugent) has stated: I want my votes counted by machines, not partisans. Brazil should have sent officials to supervise Florida's vote handling; it was the most outrageous case of vote fraud that I have ever seen. Both sets of Rep and Dem partisans were involved in chicanery with vote handling, from hanging chads to improperly-labeled proxy votes. (Rant, rant, rant! Wheeew, I'm okay now.)

Vroomm......

[s.fontinalis]

Can you say Al "Chainsaw" Dunlap?

Actually many facts are already out

[geek]

Like:

1) The former CEO retired before this came out, and recieved a 400 million dollar loan from WorldCom via the CFO

2) The majority of the big wigs at WorldCom right now are new thanks to restructuring. This is called "being handed the bag"

3) Stockholders can not be held criminally liable. Notice the stock is down, that's because they sold it all to make a profit.

It's blindingly obvious what happened. You sound like a "cup is half full" kinda guy/gal. However in corporate America business is war and the majority of business folk truely are corrupt greedy and evil. I know this from many many many years of experience.

In the military the officers are held liable (even criminally) for all actions, duties and personal they are responsible for. In corporate America it's exactly the opposite thanks to golden parachutes, shady accounting practices, hiding behind corporate protections.

When something is complicated, 99% of the time thats a sign of corruption. If it's complicated it means people are trying to hide something (security through obscurity). Notice how complicated corporate America has become. It's diseased and everyone is figuring that out. Stocks are down because no one trusts busnesses anymore. Managers no longer manage, execs are no longer responsible, stock holders want to sell company after company making larger and larger profits. No one wants to build anything anymore. I remember when execs started companies to build a product or service, and they would stay with that company for decades until they retired. The avergae life expectancy of a CEO at a company today is less than a year before they sell the business or it goes under.

Guess I'm just a glass is half empty kinda guy......

Re:Actually many facts are already out

[bdlarkin]

When something is complicated, 99% of the time thats a sign of corruption.

This is just bullshit....

Weather systems are complicated, yet I don't accuse my weatherman of corruption because it rained when he said it wasn't going to.

Medicine is complicated, but I don't accuse my heart surgeon of corruption because he has to use a bunch of very technical terms to explain how my heart works.

Or are these examples just the 1% your talking about?

Financial results can be complicated too. That doesn't mean that every company that has complicated 10-q's is corrupt. If it were that easy people wouldn't have been hoodwinked

they are not that stupid

[Edmund Blackadder]

they are just dishonest.

That's What I'm On About

[Greyfox]

This is probably why the stock market is taking such a heavy nose dive. Until investors can be sure that they can actually trust a company to state its earnings correctly (see my other posts about how companies are only in it for the money; no altruism involved) the market will continue to tank.

We need to start holding upper management legally responsible for this crap. Guarantee long jail sentences in an ass-slamming federal prison (Not club fed) and this shit will stop.

Moron.

[s.fontinalis]

For a stock like Worldcom - it doesn't particularly matter if you put in $3k at $60/share or $30/share or $15/share. It's trading at $.40! That's $20, $40 or $80 - not much of a difference between those, and still less than you would have got from the redemption on beercans.

To review - when stocks go this far in the shitter - it don't matter if you bought at the high - or even a relative low, your still hurting bad.

Asset Lite != broke

[nelsonal]

Asset lite companies are simply the companies that own very little, Cisco is a good example of this, they outsource almost everything but engineering and sales. Dell is another good example. In addition to BCCI, most other banks don't carry alot of assets. They have their branches, and their comptuers, what else do you want them to own. It makes for an efficient company because, they can make a lot of money with very little. Enron was movind towards this because they were trying to become a financial company rather than a pipeline company. They got in to trouble, selling financial assets that didn't have a market value, so they could largely assign what ever value they wanted to the assets. They then set up subsidiary companies to through assets that lost money, and didn't have to show the losses, however to get other investors, they pledged their corporate credit or equity in return for those liabilities. The downside of an asset lite model, and life is full of trade-offs, is that you don't have the assets when times get bad. If you own a factory, you can sell it during the down times. World com has lots of assets, they spent billions running fiber accross the country, its just that the fiber isn't selling now, so its not worth much, but their debt didn't devalue in the same manner. That makes you broke, not asset lite.

I wonder how many are trolls and fake posts.

[Anonymous Coward]

As serious as people threatening suicide and having major financial losses, remember that not everything on the internet is true. I would not be surprised if some of these are just trolls and/or other individuals taking advantage of this situation. Besides, anyone can claim anything on a message board.

Google Sets

[jesser]

Enron, Worldcom, Microsoft?

(Discovered by Ksosez on #mozillazine.)

VOIP = Cisco Stock Inflation

[s.fontinalis]

VOIP is the biggest joke in the telcom world right now. Without spending a buttload of bucks on QOS you can't get half the quality that people demand for Voice. When you spend the money to get QOS, any cost advantage you had is neutralized. The only reason anyone cares about it is it's the only way CSCO can attempt to sell stuff to the RBOC's. Except it's not working. As Public Enemy said "Don't Believe the Hype"

Re:VOIP = Cisco Stock Inflation

[letxa2000]

VOIP is the biggest joke in the telcom world right now.

I agree with you... Right now. But, again, give it 10-15 years and no-one is going to be laughing, especially at MCI and AT&T.

Re:VOIP = Cisco Stock Inflation

[s.fontinalis]

Given the current status of Worldcom - their may be no one left at MCI to laugh!

Seriously though - VOIP may well have a future, but I really only foresee it in some time of great network overcapacity. I'm not a futurist though, so don't quote me. As for the time scale, 10 years is on the conservative side, given the current Holocaust in Telcom.

Re:VOIP = Cisco Stock Inflation

[letxa2000]

Given the current status of Worldcom - their may be no one left at MCI to laugh!

Good point.

Seriously though - VOIP may well have a future, but I really only foresee it in some time of great network overcapacity.

I agree. That's why we don't have it now. But with all the "dark fiber" out there I doubt it would require much more than lighting it up and laying a little more on the "last mile." Certainly do-able.

As for the time scale, 10 years is on the conservative side, given the current Holocaust in Telcom.

I think the failure of Telcom companies will only accelerate the acceptance of VoIP-style solutions. As huge companies with strangleholds on the communications market go belly-up there will be huge opportunities for others to do something innovative such as this.

Fact is, LD rates are dropping lower every day. Cell phones are including more and more minutes which include free nationwide LD. Any way you look at it, prices are heading towards zero. When prices get to some point they will have to switch gears (to VoIP) to be able to compete.

When that happens, prices will be, say, a penny per minute. And then it's just a matter of time before some competitor says, "Why pay per minute? Pay us $30/month for all you can speak worldwide." It's just bandwidth which really doesn't cost anything once it's installed.

Anyway, that's my prediction. I've been wrong before... but only once. :grin:

Re: Worldcom and UUNET "may just go away now"

[Cramer]

Unfortunately, blocking everything originating from AS701 would mean about 90% of the internet would simply disappear. Maybe that's what you'd like?

It's going to get worse...

[Anonymous Coward]

An[d] even though anybody else has little to do with WCOM, the whole market is going to plunge.

For good reason.

1) Worldcom is MCI and UUNET. MCI is the first of the competitive long distance companies and the second largest telecom. UUNET is the first commercial ISP and one of the largest. Both may just go away now.

2) Bankruptcy of something as large as Worldcom can affect a lot of other operations. While the people who buy the pieces will probably keep them running, the people they bought equipment and owe money to can probably kiss it goodbye (along with future orders they were counting on and building equipment to fill). So can everybody who bought their stock or bonds: Banks, retirement funds, money market funds, bond funds, corporations who parked some of their cash reserves in those funds, ... You'd be surprised who will be hurt, because you don't know who has exposure. The investors don't know who either, so they'll avoid everybody until they find out.

3) Also if they go belly-up, their stuff gets sold at bankruptcy-auction prices, like ten cents on the dollar or less. Equipment winds up on E-bay and equipment manufacturers find themselves competing against their own stuff. Bottom drops out of market and equipment manufacturers suffer still more. If the buyers keep MCI and/or UUNET running, they now have working networks for which they paid nearly nothing. So they can drop their prices almost to the cost of operation and undercut competitors who had to pay for (and are still paying for) their equipment. The other tecoms and/or ISPs tighten belts further and/or start operating at a loss and also go belly-up. Down go more suppliers, more investors, more associated industries. Maybe some of THOSE go belly-up, and the fire spreads further.

4) It's another accounting scandal. (Anderson again. Oops.) This will make investors leery of other companies, raising the perceived risk of further financial scandal. ("Once is chance, twice is coincidence, three times is enemy action.") The value of stocks and corporate bonds is ONLY what people are willing to pay for them at any given instant, and people base their valuation on perceived risk vs. benefit. If the risk just got bigger than the benefit, they won't trust stocks and bonds and won't buy them. The whole market tanks.

A broad drop the market from this makes perfect sense to me.

Follow the money...

[rsborg]

We know who loses in this game, obviously anyone with any vested interest in WorldCom.

$64,000 question is, who *wins*?

Although not as prevalent, I'm sure this sort of "book-cooking" goes on *all the time* at random big company (corporate interviewer to accountant: what does 1+1=? Accountant: Whatever you want it to be).

Who bailed on the stock so fast that it lost 78% of it's valuation? Who had placed the shorts well ahead of "knowledge" of this event?

Well, there was investigation when 9-11 happened and some people had big money shorting AMR and UAL. I wonder who's making money off this?

Even I didn't think there were this many crooks.

[Animats]

Over two years ago, I wrote on my Downside site that I expected a collapse of the Internet bubble and a depression. I was completely right about the Internet bubble, but that was blindingly obvious to anyone who could compute how overvalued those turkeys were. I expected some spillover of the Internet debacle into the wider economy, and saw that the whole market was way overvalued.

But I didn't expect so much fraud. The numbers from the Internet companies were terrible, but honest; you could predict failure from the financial statements. I didn't anticipate phony numbers from hundreds of major, established companies.

We need to put a few dozen CEOs and CFOs in jail to restore confidence in the economy. Top management needs to be so afraid of going to jail that they don't dare cook the books.

Maybe...

[Kormac]

Maybe in an attempt to recover some of the money, they'll stop sending me the bill for the wireless account that I closed over a year ago that has a balance of -$.17 (I've called them repeatedly about this, and every time they assured me that it would be taken care of - its not like I need to collect on the 17 cents) :)

You'd think they would have deducted the cost of the stamp from the "credit" my account shows...

Its just as well...

[cca93014]

...they didn't have Andersen as their auditor.

Oh.

Oh dear.

Possible Prosecution under RICO Statutes?

[Anonymous Coward]

I am no Lawyer, and this probably will NEVER happen given the political climate in Washington, but it seems that RICO would be perfect for these corporate officers.. It seems they could be prosecuted under sections 1344, and section 2315 at least. Perhaps some class action law suits against these companies under the statute will wake up these executives.

www.ricoact.com

- Quote -
Bank Fraud; Theft or embezzlement from employee benefit plan

18 U.S.C. 1344 Bank Fraud; 18 U.S.C. 664 Theft or embezzlement from employee benefit plan

1344. Bank fraud

Whoever knowingly executes, or attempts to execute, a scheme or artifice

(1) to defraud a financial institution; or

(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

Sale or receipt of stolen goods, securities, moneys, or fraudulent State tax stamps

U.S.C. Title 18 2315

Whoever receives, conceals, stores, barters, sells, or disposes of any goods, wares, or merchandise, securities, or money of the value of $5,000 or more, or pledges or accepts as security for a loan any goods, wares, or merchandise, or securities, of the value of $500 or more, moving as, or which are a part of, or which constitute interstate or foreign commerce, knowing the same to have been stolen, unlawfully converted, or taken; or

Whoever receives, conceals, stores, barters, sells, or disposes of any falsely made, forged, altered, or counterfeited securities or tax stamps, or pledges or accepts as security for a loan any falsely made, forged, altered, or counterfeited securities or tax stamps, moving as, or which are a part of, or which constitute interstate or foreign commerce, knowing the same to have been so falsely made, forged, altered, or counterfeited; or

Whoever receives in interstate or foreign commerce, or conceals, stores, barters, sells or disposes of, any tool, implement, or thing used or intended to be used in falsely making, forging, altering, or counterfeiting any security or tax stamp, or any part thereof, moving as, or which is a part of, or which constitutes interstate or foreign commerce, knowing that the same is fitted to be used, or has been used, in falsely making, forging, altering, or counterfeiting any security or tax stamp, or any part thereof --

Shall be fined under this title, imprisoned not more than ten years, or both.

This section shall not apply to any falsely made, forged, altered, counterfeited or spurious representation of an obligation or other security of the United States, or of an obligation, bond, certificate, security, treasury note, bill, promise to pay or bank note issued by any foreign government. This section also shall not apply to any falsely made, forged, altered, counterfeited, or spurious representation of any bank note or bill issued by a bank or corporation of any foreign country which is intended by the laws or usage of such country to circulate as money.

sing it now - "Should I Stay or Should I Go?"

[mrscorpio]

I'm in the highest level of email customer service at MCI (which is to say about 2 steps above peon). Am I going to get canned? :(

Chris

Re:sing it now - "Should I Stay or Should I Go?"

[Anonymous Coward]

Yes, you're fux0red. On the plus side, apparently the world is ending on August 17th, 2002 anyway, so your severence should cover you until then.

Re:sing it now - "Should I Stay or Should I Go?"

[jhylkema]

You probably will get canned, unless you get replaced by an H1B or your job gets shipped to India.

Re: Worldcom and UUNET "may just go away now"

[z_gringo]

WorldCom has not closed down the abuse department. When WorldCom is notified of open relays or infected servers or attacks from within their networks, the clients for those circuits / IP's are contacted and told to repair the problems. If those clients don't respond to the abuse department, and don't correct the problems, they can be disconnected.

Spam accounts for very little of the traffic coming from UUNET, and your 90% statement is just ridiculous.

Re:An even though.. (Cisco)

[z_gringo]

I think you are thinking of the Cisco commercial that says that 90 percent of all internet traffic passes over the systems of one company - Cisco Systems..

However, you are correct, UUNET does carry moreInternet traffic than anyone else, and WorldCom group would has massive amounts of intercontinental backbones, not only between US and Europe, but also between Europe and Asia.

Old news?

[Anonymous Coward]

I get the impression this is old news:

NEW YORK--(INTERNET WIRE)--May 13, 2002--A securities class action lawsuit was commenced on behalf of all persons who purchased or acquired WorldCom, Inc. (NASDAQ: WCOM) (?WorldCom? or the ?Company?) securities between January 3, 2000 and April 29, 2002, inclusive (the ?Class Period?). A copy of the complaint is available from the Court or from Bernstein Liebhard & Lifshitz, LLP. Please visit our website at http://www.bernlieb.com or contact us at (800) 217-1522 or by email at WCOM@bernlieb.com.
The case is pending in the Southern District of New York located at 500 Pearl Street, New York, New York 10004. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder, as well as pendant state law claims for fraud, negligent misrepresentation, and intentional deceit and seeks to recover damages. The complaint alleges that defendants violated the federal securities laws by making misrepresentations and/or omissions in connection with false and/or misleading financial statements.
The complaint specifically alleges that defendants misrepresented WorldCom's earnings in its public filings with the SEC and elsewhere as a result of failing to record write-downs of goodwill and other intangible assets associated with WorldCom's acquisition of numerous telecommunications companies at premium prices. The complaint further alleges that defendants affirmatively misstated the value of goodwill

http://www.bernlieb.com/php3/press_release.php3? 26 4

Microsoft have dodgy accounting practices too...

[sarabob]

http://www.theregister.co.uk/content/4/24068.html

However, having untold billions in the bank should help a little :-)

Saw this one coming..

[Anonymous Coward]

I've been hearing talk about this trainwreck for a while now, so why is this coming as a surprise? How is it that I would be hearing things when I am not in any loop, a non-shareholder in any company and work in a wholly unrelated field (non IT, non economic/investment)? Why - because this writing was on the wall.

The Great Depression

[David Off]

After the stock market fell in 1929 it took the Dow Jones until 1953 to recover. If you were in your early 40s at that time and your pension plan was in shares your retirement was toast.

Luckily the post-war baby boom bailed out the pensioners.

Mafia Money

[David Off]

A good while ago (1997) a Worldcon founder employee told me that Worldcon was originally funded by Mafia money made on a US garbage cartel. Does anyone know more about this, I've not seen anything on the Internet so am doubtful....

Re:An even though.. (Cisco)

[Anonymous Coward]

No, definitely not. It was on Worlcom's site (or one of their international sites), and said that x % of all international traffic worldwide passes through one of their cables somewhere.

Let me guess

[Anonymous Coward]

Without reading any further let me guess... Arthur Anderson was their auditor

All we need now is another major terrorist attack

[Anonymous Coward]

Consumers are actually starting to feel a little more confident about the way things are going in this country and suddenly some stupid, fat republicans at Worldcom go and screw everything up.

Here's a lesson: If you see a republican with power, run!

Re: Worldcom and UUNET "may just go away now"

[vortexer]

It's not ridiculous.
see here: http://www.caida.org/analysis/topology/as_core_net work/pics/ascoreApr2002.gif

Just another liar with an agenda.

[Anonymous Coward]

The Social Security Trust Fund is held in the form of Treasury Bills. So you are saying t-bills don't represent an obligation of the government to pay back the fund? T-bills are worthless. Nice. So the core institutional barter system vanishes like smoke because a conservative wishes it so.

Don't let reality intrude on your polemics though, cupcake.

Testify!

[RabidMonkey]

Thank you for stating the obvious ... finally someone who actually gets it. Slowly undermining out trust isn't terror - terror is bodies falling from 100 floors up. Terror is bombs strapped to bodies. Terror is a complete loss of trust in something that was once trustworthy ...

While I agree that slowly crippling the economy is bad, it's not terrorism.

Well said.

what he did

[vanguard]

In case you haven't read enough to figure it out yet I'll tell you.

What he did was "inflate earnings" by nearly $4b. This is normally using a couple of methods.

1. They can ignore expenses or report them in a way that doesn't count against profits.
2. They can inflate revenue by using tomorrow's sales in today's profits.

I haven't seen exactly what they did yet, maybe it's a combination of both. Either way, nobody took the money in cash, they just lied about the company's profits.

Vanguard

PS I used to feel "a little" sorry for Anderson, the accounting firm. Now it seems like looking the other way was part of their corporate culture. I'm glad they're going out of business now.

The final blow to trust in US equities

[Anonymous Coward]

For all those who think US capitalism works, here's a quote from an expert:

[From bbc.co.uk]: Nomura, the Japanese investment bank, was even more scathing.

WorldCom, it said, "has delivered the final blow to trust in the US equity market".

"There was plenty of other unpleasant news in the background, but WorldCom is a timely reminder that Enronitis was a systemic problem," Nomura economist Anais Faraj said.

"Even though the markets were never going to go onwards and upwards for ever, the US markets had priced in perpetual growth," he told BBC News Online.

"Basically, the US market is dead now."

Show me the money...

[tkrotchko]

"This is untrue"

Really? Can you show me the document that says you'll get anything back from the money you and your employer "invested" on your behalf in FICA?

You can't.

Congress might fold it (unlikely), change the eligibility requirements (likely), change the benefits (certain). Anything could change, and specifically, you aren't guaranteed anything other than you have to pay

So FICA has an IOU from the treasury, but your name isn't involved anywhere. So YOU aren't owed anything.

But you OWE 15.4% on all your wages to this mythical retirement plan. Fortunately, your employer is NICE enough to pick up 1/2 the tab.

Re:Show me the money...

[eaolson]

But you OWE 15.4% on all your wages to this mythical retirement plan.

Social Security is NOT a retirement plan. It is a safety net. It is not something intended for you to retire to Florida on. It is intended to stop people from living in abject, utter poverty as they reach the end of their days.

Put much better than I ever could: Andrew Tobias's Column from 05/09/01

Our FICA money is, for the most part, not invested for our future retirement. As fast as we pay it in, most of it is paid right back out to our parents and grandparents just as the taxes they paid when they were working were paid out in benefits to their parents (and the taxes your kids will pay when they are working will be paid out to you).

Social Security was never intended as an investment program, nor as being sufficient to provide a comfortable middle-class retirement. It was intended as a bare-bones, bare-minimum safety net a pact between generations to assure that none would starve, each successive generation taking care of the last and it has served that purpose, and is likely to continue to.

The first generation paid very little in taxes and got, relatively speaking, huge benefits in return. (For one thing, people started living longer than the original draftsmen of Social Security expected they would. Instead of collecting benefits for three years, they might collect for twenty-three.) That first generation made out like bandits. By now, with so many more retirees to support, the "return" you are likely to get on the taxes you pay in will be much smaller. But neither, as John Seiffer points out above, are you as likely to have your grandmother living in your house with you for the next 20 years.

It's true that in the past decade or so we've begun collecting more than we need to pay out right now, hoping to build a cushion for when the baby boomers are retired, with too few workers to support them all. (When Social Security was launched, there were about 40 workers paying into the system for each retiree receiving benefits. Now it's more like 3 workers and headed for 2.)

This surplus is invested in a special form of Treasury bond. I forget the exact formula that determines the rate, but it's a lot more than 2%, at least before allowing for the effect of inflation.

NY Times story

[paranoic]

You mean this one? Telecom Outlook: First the Bad News, Then the Bad News

Re:25 of 29 biggest telecom companies will go bye-

[cybercuzco]

Further example: Apple Computer, which during the early 90's hemmoraged money like a sieve, even though they had revenues of 8 billion a year, they were losing up to $400 million a quarter. Enter steve jobs, who has made the company profitable for 9 of the last 10 quarters even though its yearly revenue has shrunk, all the while putting out new and innovative products (ipod, flat panel imac, cube). How much is Jobs salary? $1 a year. After 3 years of working for a dollar a year the board of directors had to finally give him some compensation in the form of stock options. Unfortunately those options are worthless ecause they excercise at $45 a share and apple is at ~$17 a share. Jobs works because he loves apple, not because of any other reason, and its too bad we dont have more CEO's like him.

George Bush drink driving conviction

[Anonymous Coward]

How proud you must be of your Prez.

http://news.bbc.co.uk/hi/english/world/americas/ ne wsid_1004000/1004907.stm

Diversify funds

[mocker]

Hopefully the people at Worldcom learned from the employees at Enron and diversified their retirement plans a little bit. The thing that makes all this so bad, is when the little people get screwed. Investing all your assests in one company has always been an iffy idea, but doing it in the tech sector right now is just silly. Here's hoping that the employees don't all get screwed.

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[account_deleted]

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Telecom meltdown

[revscat]

Not that you need much convincing, but this article over at the NYTimes is rather interesting, considering recent events. It talks about the extremely rough times that telecom companies are going through, and leaves open the possibility of a complete meltdown of that market. Scary, because as you said this affects everyone in the tech industry.

What happens if the internet collapses?

[Mustang Matt]

If Worldcom/MCI/UUNet dies, what happens to the internet?

The only advantage I see is that maybe the flow of spam will slow when routers start getting their plugs pulled. hehe.

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[account_deleted]

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New investment strategies.

[freerangegeek]

I'm beginning to think that my smartest investment would be to sell any Fortune 100 Company audited by Arthur Anderson short. First the brought you Enron, then WorldCom, coming soon....

If we actually get sucked into a depression by all this 'shady accounting', I'm thinking that there are going to be some former officers of Arthur Anderson "up against the wall".

Re:WRONG! but WAY OT

[SubtleNuance]

Interpreting the Commerce Clause, which I am well aware of, in such a manner is a gross exaggeration of what was intended.

Like the way Republicans fail to understand " A well-regulated Militia being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed."

OT: Nanog-l

[J.J.]

Little gems like this are exactly why I read slashdot. Thank you! I've been in networking for two years now, and have been searching for an active news site/mailing list/community of intelligent people that are discussing networking specific issues.

There are sites out there that are well-publicized and have a lot of advertisers, but they're all crap. All fluff, no content. Any 'networking news' site is just an agreggator that filters based on keywords, and is filled with the latest press releases from Microsoft. I don't want to hear about Microsoft - I get enough of that in the standard press.

Thanks for mentioning the list!

JJ

i should buy some wcom stock.

[Anonymous Coward]

I think i'll buy some now that it's "on sale". It's MCI man, it's not like MCI is going to close it's doors. Places like that, even if they declare bankruptcy (and first they would declare bankruptcy protection and perhaps bail themselves out) stay up for literally years.

TERROR ALERT!

[Zeinfeld]

What is the betting that in the next couple of days we see another terror alert just as the press start to ask questions about the administrations involvement in Enron and what happened to the promised reforms of accounting practices?

Of course anyone accusing the administration of such a cynical ploy would be evil and unpatriotic.

And while the press argues over the terror alert the World Com crooks will be collecting their $1.6 million a year pensions.

Lies, Damn Lies, and Charts ...

[UNIBLAB_PowerPC]

Um, hello, excuse me, but did the folks at Yahoo fail elementary graphing or what? Notice the units on the vertical axis of the chart (stock value in dollars) -- why is the scale between 1-5 MUCH, MUCH larger than the scale between 5-10, 10-15, and 10-20? FWIW, I can't remember the proper terms and don't care to look them up at the moment (can a mathematician clue us in with a more insightful disection of these charts, please?), but we all know that the distances between points should be equal -- and when they're not equal, the chart is biased and does not properly represent the data. What's up with this, folks?

And isn't it ironic that even Yahoo's chart makes this type of financial snafu look less severe than it actually is (I.E. that graph should be taking a serious nose dive but the downward slope is less exaggerated because of the biased scale -- in a visible sense, that is)?

Re:Lies, Damn Lies, and Charts ...

[shawnseat]

why is the scale between 1-5 MUCH, MUCH larger than the scale between 5-10, 10-15, and 10-20?

It's on a logarithmic scale, which makes much more sense than a linear one. If you buy KMart at 75 cents and sell it for $1.50, you're up 100% (which shows up logarithmicaly), instead of being lost on zero axis (since it was about $15 last year). It will make it easier to see where people make money trading WCOM as a penny stock. :)

From CNN.com

[unicorn]

"WorldCom said restating these improper transfers would cut earnings by $6.4 billion for 2001 and $1.4 billion for the first quarter of 2002."

Re:From CNN.com

[Monkeyman334]

From the AP:
"WorldCom, which owns the nation's No. 2 long-distance carrier MCI, said Tuesday that more than $3 billion of expenses in 2001 and $797 million in the first quarter of 2002 were wrongly listed on company books as capital expenses, thus not reflected in its earnings results."

From the President, I'm sure if he could figure it out, anyone can:
"I am deeply concerned about some of the accounting practices that take place in America," Bush said. "There are revelations that WorldCom has misaccounted $3.4 billion. It's outrageous," Bush said. "We will fully investigate and hold people accountable for misleading not only shareholders but also employees as well."

Three Li'l Ideas

[smagruder]

Three ideas:

1. Arthur Andersen must be destroyed. They've committed tremendous egregious wrongdoing against the public interest, and their charter should be revoked.
   
2. New tax system to replace all others: Corporate Revenue Flat Tax (yes, revenue, not profits) applied to all revenues over $1 million. Everyone else pays these taxes indirectly via purchases. Actually, this means simpler accounting for most businesses, less cheating (harder to hide revenue), no more corporate welfare, a more decentralized economy (as smaller businesses will have lower price pressures than they do now), and rids most of the rest of us from having to deal with tax forms and the April 15 mess!
   
3. Send some of these creeps responsible for wrongdoing at Andersen, Enron, Worldcom, etc. TO PRISON, for 's sake!!!
   

Re:Three Li'l Ideas

[rsdavis9]

Its called a VAT(Value added tax). I think it would be a more "fair" tax system. Everybody would pay taxes on consumption. The question is what kind of exemptions would you allow? Food? Food only for poor?

Re:CEO Stock Options, Accounting.... (PBS Frontlin

[5KVGhost]

Of course, the reason that companies began offering huge stock options was as a means of directly tying company performance to CEO salaries, which wasn't a bad idea at all. If a CEO ran a company into the ground then the stock would be devalued and their personal compensation would suffer.
The assumption was that the CEO you hired to run your company would not place his own personal well-being over that of the company itself. That's not really unreasonable; all employers must place some trust their employees, and I'd guess that many of us here are in a position where we could abuse our own administrative authority for personal gain if we were dishonest bastards willing to do so.
Unfortunately it's now become clear that some CEOs and many of their cronies are, indeed, dishonest bastards. Nothing more than scam artists and thieves, with major accounting firms complicit in the crimes.

Re: Worldcom and UUNET "may just go away now"

[Solaris_Devil]

That Skitter graph does not show the amount of SPAM.. it shows the amount of traffic going through that network

Wrong

[s.fontinalis]

Enron's declaring bankruptacy was a direct result of their bookkeeping shenanigans. The precipitous drop in their stockprice after their creative accounting came to light caused a downgrading of their credit rating. This in turn caused an increase in their interest payments, and a limiting of their available credit. For any business, but particularly a trading house, eliminating your credit, and thereby your buying power is a substantial hit. When you couple reduced credit, with increased expenditures(higher interest payments) & reduced revenue because of a slowing economy - you're dead(well bankrupt)

Re:Not quite...

[symbolic]

the capital system is, by definition, and efficient market. all company news is built into the current stock price,

No, no, no...in Worldcom's case, the 'company info' that was built into the stock price was completely false. This led to a stock price that was way out of line with its true value- not because investors made an educated choice based on accurate information, but because they were misled.

Re:25 of 29 biggest telecom companies will go bye-

[Ben Hutchings]

Actually the exercise price on the latest options (7.5 million of them) is $18.30, which is not so far away.

the real terrorists

[jafac]

These guys are worse than the silly ragheads who hijacked a plane and killed 3000 people on September 11th. They've done more harm to our economy, I don't think that's up for debate. Good companies can now not get investment dollars because these bastards abused the system and lied and cheated.

So, tell me - if fucking up our economy causes people to lose jobs, lose houses, eat less healthy, and those of us still with jobs to work harder to health-threatening levels because we're afraid to get fired, and the massive amounts of poverty this generates, which leads to higher crime rates, teen pregnancy, illiteracy, and government default on loans, why the hell are we spending billions of dollars on a huge "ministry of truth" style agency to listen in on our phone calls for mad suicide bombers, and yet we leave organizations like the SEC critically underfunded to the point where they've got like a dozen underpaid accountants devoted to the job of monitoring tens of thousands of publicly traded companies.

Part of rebuilding after September 11th was improving security precautions on airline travel so that people could trust flying again.

Why in hell is nothing being done to restore people's faith in corporate accounting and the stock market?

For one, I hope we have armed federal martials at WorldCom RIGHT FUCKING NOW, making sure they're not shredding truckloads of documents. Because with Enron/Anderson, somebody dropped the fucking ball.

Re:the real terrorists

[raindr]

Right on brother!~

flap-dampening for financial markets?

[Paul Jakma]

Perhaps it's time to implement flap-dampening in the financial markets?

put an arbitrary lag time in between buy/sell orders. Scale this lag time according to stability of the market. Put upper and lower bounds on the lag factor. eg minimum of 1 week, max of 3 months.

In very stable times, you'd have, say, a week between order and execution, if something caused the market to become volatile, lag factor would increase accordingly, up to say, 3 or 4 months. In times of imbalance (selling > than buying), the lag factor would increase and dampen it / slow it down, and in times of stability (selling ~= buying) the lag factor would be at a minimum and more responsive. Volume would not be affected - as long as the market stays reasonably stable.

This would force people to make stock decisions based on /long-term/ factors, cause short-term wouldnt be available and mid-term (eg 6 months) would have little value, because the possibility would be there that in the mid-term when they want to sell/buy lag time might be one or two months and they'd be caught out.

So the market be dampened from volatility. Investors would need to play it on a long-term basis, which would need neccessitate quite 'frank' accounting practices - which would be lobbied for and put in place.

anyway..

boo hoo for all of us

[Bill the Cat]

I'm getting a bit tired of all the whining.
I don't recall hearing much bitching and holier-than thou economic speech making when everything seemed to be going well.

The biggest advantage of free markets and societies is that they are able to clean up their mistakes. In any system, mistakes are going to be made with allocating capital (financial and personal). The capitalist system is the only one that allows the mistakes to be recognized and cleaned up.

It's sad what's happening to people that depended on Enron, WorldCom and all of the rest. I refuse to believe, however, that this the ultimate condemnation against the United States and society. There's a reason why the Soviet Union collapsed, why China is still a 2nd rate economic power, and why growth in most of Europe has stagnated during the past few years: market economies with a minimum of regulation are better for everyone in the long run.

How to protect yourself from getting splattered in the short run:
1. diversify your investments, both financially and personally
2. educate yourself about how the economy works, what's happened in the past. There's no excuse for ignorance these days
3. learn to think critically about economic and investing matters. Anyone with any kind of sense could see that the US stock market bubble was bound to burst, and that the results would be nasty
4. make "life, liberty and the pursuit of happiness" your goal, not "greed, fear, and anxiety"

Two words: JAIL TIME !

[HermanH]

As a former MCI/WCOM cubicle dweller, who still holds some of his shares in the [almost dead] company, I hope that WCOM is the final straw that will cause white collar crime to be taken more seriously, and I also hope that Scott Sullivan and the rest of the corporate greed-heads will f*****g rot in a cell!

Re:Even I didn't think there were this many crooks

[phillymjs]

We need to put a few dozen CEOs and CFOs in jail to restore confidence in the economy. Top management needs to be so afraid of going to jail that they don't dare cook the books.

Yeah, and not some minimum-security country club, either. Send them to Federal Pound-Me-In-The-Ass Prison, write "child molester" or "rapist" on their foreheads with a Sharpie on their first day, and toss them right into general population.

Our justice system needs to start making examples of the right people. CEOs who sink companies, ruin careers, and destroy hundreds or thousands of employees' financial well-being in the process are the right people. Some kid who sold a shroom to an undercover cop at a Phish concert is not the right person.

~Philly

That's why you pay your officers in stock

[mec]

That's why you (as a stockholder) want to pay the officers of your company with stock and stock options rather than cash. That way, executives who make the albatross acquisitions end up with worthless underwater options.

I actually think that there's a flaw in that compensation model, in that a lot of executives would prefer to have 10,000 subordinates and a net worth of $10 million rather than 2,000 subordinates and a net worth of $50 million. Unless you're into serious world-changing philanthropy such as Ted Turner or Bill Gates (yes, I know, flame him for his business practices and how he earns it, but he really does spend a large percentage of his MSFT gains on education and third world health) ... anyways, unless someone is into that level of philanthropy, it doesn't matter how much $$$ they have after the first $10 million or so. So they start maximizing other things instead, such as their head count.

Meanwhile, if you, as an employee, want to get paid all cash+benefits and little or no options, it's easy enough to find a large company that pays that way. You can have it either way: you can get paid based on your own performance, or you can get paid based on other people's performance too. But you can't have it both ways.

Re:That's why you pay your officers in stock

[Anonymous Cow herd]

That's why you (as a stockholder) want to pay the officers of your company with stock and stock options rather than cash. That way, executives who make the albatross acquisitions end up with worthless underwater options.

Ahh, but the execs are in a position to see things ahead of time that will allow them to dump their stocks and "resign", while Joe Stockholder & the employees are left holding the bag. With enough creative fudging, you can keep the big block investors & fund managers with the wool pulled over their eyes (apparently!) long enough to get out of Dodge before the poop hits the fan...

Re:That's why you pay your officers in stock

[mec]

Ah, and that's why companies have vesting, where the stock doesn't actually accrue to the executive for several years. A typical period is four years, which is plenty of time for a lot of scandals to come out.

Not to mention that "dump their stocks ahead of time" is trading on material non-public information, which is a felony -- a personal felony for an executive doing it, not something that falls under the limited liability of the corporation.

Re:Even I didn't think there were this many crooks

[forkboy]

Right on, brother! I've been saying for a long time that it's about time that corporate raiders who through knowing actions damage the well-being or security of others are much bigger criminals than some hippie who's all hopped up on goof-balls.

Let's stop punishing the victimless crimes (don't give me that Broken Windows Theory crap either, James Wilson and George Kelling are ignorant) and start punishing the victimizers.

There just needs to be a large enough public outcry against this sort of behavior before there is change. If it comes down a matter of getting re-elected or not, I bet you dollars to dildos that the congress-critters will drop dime on their CEO golfing buddies so fast it'll make their kids ugly.

What about the $10 billion hole in MS?

[Anonymous Coward]

Why is no-one reporting the $10 billion dollar hole in MicroSoft? Everyone wonders who will be next, but the answer is hidden in the noise.

Re:Even I didn't think there were this many crooks

[Animats]

Without honest financial statements, there is no investment. There is only speculation.

And right now, the odds are better at the racetrack.

What? That can be THAT Scott Sullivan

[Anonymous Coward]

You are not talking about "CFO Excellence Award" winner Scott here?
See this :
http://oswegoalumni.oswego.edu/magazine/spring99 /2 . tml
"CFO magazine selected him for its 1998 CFO Excellence Award in the mergers and acquisitions category"
"The lightning speed that moved that historic merger has hardly slowed for Sullivan as he has engineered the integration of MCI into the WorldCom organization."
"Last fall that integration included the largest corporate bond financing at $6.1 billion and a $12 billion bank deal."
Hmmm.... What are our award winning CFOS coming to now a days?

Point Against Mega-Mergers

[monkeylich]

Greedy CxO's pulling stunts like this provide ammunition against allowing big mega-merger deals.

Formerly stable and well respected companies that are swallowed by larger fish now sink with the ship in scandels like this, leaving ordinary folk out of jobs, out of investments and out of faith in the system.

I fail to see how this benefits consumers.

Rape is funny, so let's joke about it!

[Anonymous Coward]

N/M