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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.
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.
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.
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
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.
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.
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.
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
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).
"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.
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.
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.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
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.
Stop the brainwash
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.
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.
"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.