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

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.

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

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:'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.