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WorldCom to File for Chapter 11 Protection
Mantour writes: "To everyone's big suprise ;), Worldcom is going for Chapter 11. 'The Chapter 11 filing by WorldCom would follow once high-flying companies like energy trader Enron Corp. and Global Crossing Ltd., which crumbled into bankruptcy amid a crush of accounting investigations by federal regulators.' You can get more info in this Yahoo story" Update: 07/22 12:21 GMT by T : mnordstr points out a CNN report calling this "the largest bankruptcy ever."
I am a Worldcom employee, and here's my question, that I cannot seem to find an answer to anywhere. What does this mean to employees? I find lots about investors, bankers, and bond-holders, but very little about employees.
"He who would learn astronomy, and other recondite arts, let him go elsewhere. " -- John Calvin, commenting on Genesis 1
So, Bush wanted to American people to think he was doing something about the rashes of corporate corruption. So what does he do? He creates a task force, and doubles the (very small) penalties for this sort of thing.
You know what he should have done... If he had said that this sort of activity will fall under the mob laws, this would stop, and we'd know the president was not corrupt. If that happened, that would mean anyone involved in illegial activity would have full liability. You wouldn't just get 10 years in jail, then get out with all your ill-gotten money in-hand. The feds would be able to take away all your assets to pay off debts. Houses, cars, bank accounts, all taken away.
But then half of congress would end up in jail, and probably Bush himself.
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
Why should we pay tax dollars to keep a monopoly up and running? I hope the government doesnt step in, the government should never step in to save any company unless its an absolutely vital company such as a food company, or water or electric company where peoples lives are on the line.
Worldcom is a communications company and I hate this corperate welfare shit, we cant get welfare, so why should they?
If you use Linux, please help development of Autopac
if worldcom bellys up, how will the next owners of the network handle it?
People have always said that Microsoft wanted to own the Internet...
The last paragraph parent post makes what I interpret to be an indirect shot at the current president's economic policies. While this may or may not be the intent of the post, the mindset that I have mentioned is common enough in media reports and ordinary conversation that I feel the need to rant about how I believe President Bush is getting the shaft for a problem he is not primarily responsible for creating.
I can't stand how many people claim that the political blame behind the Enron, WorldCom, and other fradulent companies' downfalls is solely that of President George W. Bush. I find that charge to be along the lines of claiming that Bush's foreign policy failures were the chief reason for last September's terrorist attacks.
As with the terror attacks, there were many causes for the ongoing meltdown of the United States capital market. The factors leading to the sudden bankruptcies of these large companies existed long before the current president moved into the White House, and some existed even before his father lived there. Most important among the causes: the executives themselves that lied about the state of their companies. In at least the Adelphia and WorldCom scenarios, it is pretty clear that blatantly criminal acts took place: they falsely claimed profitability to obtained credit from banks that would not have loaned them money if the banks knew that these companies were in fact losing money hand over fist. These executives should be jailed for AT LEAST 10 years (if they knew that these acts were ruining the company for their own personal benefit, then I would like to see them jailed for life) in addition to making as complete a restitution as possible for bondholders and stockholders.
In addition, the incentives behind this lying about companies' financial statemets has been around since the 1980's, when the "Greed is Good" mantra began to sweep Wall Street. Both in the 1980's (until October 1987) and in the 1990's the booming stock market encouraged companies to do whatever was necessary to boost their stock price. Also, especially in the 90s, the ridiculous growth of executive pay, primarily in the form of stock and stock options, gave executives a personal incentive to boost their share prices as soon as possible. Boards of directors, who also largely paid themselves in stock, turned their backs on their obstensible duties to protect shareholders' long-term interests to bolster their own short-term interests.
There were many economists who railed against these conflicts of interest and urged the SEC and Congress to pass new regulations regarding the nature of executive pay and how publicly traded companies were to be governed. But, with the economy appearing to continue to grow robustly, the federal government saw no need to rock the boat. Hell, stock prices grew substantially for 16 of the 18 years between 1982 and 1999 (IIRC, 87 and 90 were the only two down years for the Dow Jones average in that time), so The Market couldn't be wrong, right?
Presidents Reagan and Clinton essentially got a free pass for the way they allegedly handled the economy. All they really did was continue the charade of passing off a modestly growing economy as a tremendously growing economy and let their successors worry about it when it comes to reconcile Wall Street's figures with Main Street's. In addition to coming in at the end of a business cycle, both Bushes suffered tremendous external shocks that hurt the U.S. economy: the Iraqi invasion of Kuwait in 1990 that caused oil prices to double plagued the first Bush's economy; the hijackings gave the current economy a significant body blow. Neither President can be accurately blamed for these problems.
Am I claiming that the current president or his father is infallible? Absolutely not. But using him as a scapegoat for problems that have infected the entire public and private sectors does a disservice to the president and leads to the political squabbling that will slow down the necessary reforms to the economy. The older Bush was in office for four years; Reagan and Clinton lived in the White House for eight years. GWB has barely been in office for 18 months. Which presidents do you think have had the biggest opportunity to influence economic policy since 1981? And another thing to keep in mind: before he can act, the president often needs the consent of another government body -- Congress.
Before pointing the finger at anyone or anything for a problem like today's business fiascos, one must realize that it's not that simple. If there were one cause, then it would have already been dealt with and confidence would already be on its way back into our stock markets. Our entire financial system needs to be tweaked; if one person or group ends up taking the blame for an entire economy's faults, it will end up being an injustice to everyone in the United States.
My question to a friend in the financial sector was if stock analysts have enough information to spot troubled companies like Worldcom. He said that the analyst he sits next to has been yelling since last november to get out of Worldcom stock. The biggest red flag apparently was the huge loans to the CEO. When you are looking to buy stock wouldn't it be nice to see a ranking of how many warning signs exist in the company?
You asked 'how is this a negative' when really what you are trying to ask is 'how is this his fault'.
The worldcom affair is not Bush's fault, however it is a negative because:
1. Make Bush CEO of USA Inc was his principal campaign theme
2. Bush is implicated in corrupt share deallings the full details of the SEC enquiry have yet to be released, but it is already apparent that Bush had signed a lockup agreement promising not to sell the shares at the time he sold. If Bush knew that the share sale that had caused the lockup had had to be cancelled because of the state of the company he was trading on insider information.
3. Chenney and White The VP and the secretary of state for the army are implicated in major corruption scandals.
4. Bush's hypocrisy a day after failling to accept responsibility for his own actions the president takes it upon himself to call on CEOs to do just that.
5. Fuzzy math was used to justify the Tax cut. The books at Enron and Worldcom were not cooked to half the extent that Bush and Co cooked the budget to get the Tax Cut for his rich friends through.
6. The corrupt corporations were run by Republicans with strong links to senior republicans Kenneth Lay was famously a friend of GWB and lent his corporate jet for his campaign. Worldcom was run by Bernie Ebbers who was one of Trent Lott's principal campaign contributors.
So yes, while Worldcom is not the fault of the President it makes people a lot more aware of his shortcommings and is therefore quite justifiably a negative for him.
Looking for an Information Security student project suggestion?
Try http://dotcrimeManifesto.com/
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(a) At any time after the commencement of the case but before
confirmation of a plan, on request of a party in interest or the
United States trustee, and after notice and a hearing, the court
shall order the appointment of a trustee -
(1) for cause, including fraud, dishonesty, incompetence, or
gross mismanagement of the affairs of the debtor by current
management, either before or after the commencement of the case,
or similar cause...
Fraud, check. Dishonesty, check. Incompetence, check. Gross mismanagement, check. There's certainly cause for the court to order the appointment of a trustee and kick out the current management.Comment removed based on user account deletion
Saying the banks could have just looked deeper and found the inconsistencies is like saying that if someone goes into a bank with a fake ID, and gets a loan under an assumed ID, the bank is at fault. The wole idea is that WorldCom broke the law by falsifying records... That means it would take a full fledged investigation to determine something was wrong. Come on, it's not unreasonable for a bank to assume a company is not breaking the law.
Why not? They assume I am breaking the law every time I cash a check with them. Some of them wont even honor checks drawn on their own accounts unless you have enough money in your OWN account with them to cover the cost of the check. Have you ever gone for a mortgage? I have had less invasive background checks done by the police. (but we wont go into that now.)
It lies on the bank to secure its billions of dollars of its depositors money. After all, theoretically, the bank answers to us, the peoples money who keep it afloat day to day.
Blaming congress rather than the president is borderline. The President is the Chief Executor and Chief Legislator. If he had exercised his powers to attempt to get such laws passed, and the senate did not go along with it, I would agree with you. However, it is also true that the Senate could do so on their own (but that takes much more time).
Hmm. You have a point. However, Bush has a very tough fight to get ANYTHING through congress at this point. There are enough Dem's on the hill who have sworn to oppose just about anything he tries that he has to be rather picky and choosy about what he tries to get done. And I think he has bigger fish to fry. (Or, thought he did, what with buildings blowing up, a war in the middle east, and another two wars brewing, one between Palestine and Israeal, and one between Pakistan and India). I think he's been pretty busy with other things, truth be told. But laying all the blame on him is kind of silly. Especially when these things *HAVE* been happening for the last umpteen years, and no-one else has had the desire to do anything about it either.
Again.. it boils down to how much money these CEO's and their respective companies have put in the pockets of the people who refuse to regualte them.. or the people who refuse to prosecute when they do get caught. Or who choose to hand forth extremely lenient sentences when they finally come before a judge or a review board.
After all, the laws already exist to enforce punishment on these things. Not everyone gets the Michael Milken Club Med prison treatment.
You could have fooled me. That's exactly what it appears to be. A corporation is designed with the intent to do anything within the law to make money. That mindset is a dangerous one, which is why companies are subject to laws designed specifically to regulate corporations. The fact that individuals inside a company went just too far is not unusual
You are right. It is not unusual. It should be however. The laws should be changed so that those responsible for running the companies into the ground at the expense of the stock holders and the workers should be personally liable. Their golden parachutes and multi-million dollar palaces and perks should be at risk, as well. Those smart enough to take their cash out before it gets ugly and sink it into material goods should lose those goods until they are in the position of those they have damaged on the way.
Of course, a lot of this would not happen if investors had a clue. The market of recent years has been one of rapid wealth and fast returns on big buys. That can only lead to artifially inflated stocks, and huge amounts of cash trading hands. Look at RedHat.. and see what ESR said about his "sudden millionaire status" when they IPO'd. He said he couldnt touch it for six months.. but a lot of other people made a lot of money on that stock in the first couple of days it was out. The system isnt broken.. but it sure aint perfect either.
maeryk
Feminine Protection? What is that? A chartreuse flame thrower?
Companies operating under chapter 11 do enjoy many interesting abilities, but the key aspect of the filing is the re-organization plan, which has to be agreed to by the creditors. This is not always an easy thing to arrange, and at some point creditors (as a group or individually) are allowed to fill their own plans for the reorganization, or request outright liquidation of the firm (chapter 7). Furthermore, Worldcom is or will soon be operating under debtor-in-possession (DIP) financing, which might also place severe restrictions on what they will be allowed to do. This is *not* going to be pleasant for anybody, especially Worldcom. The story at this point is that the company thinks they can use debt service savings to repay the banks (who are first in line) and get the bondholders to take equity, but if I'm a bondholder in this deal, I think I would have to insist that they cancel the existing common stock at the very least, which I curiously have *not* seen mentioned yet. And it's not clear that the bondholders could not do better in an outright liquidation scenario. Plus, there is the amusing prospect of serious litigation and criminal proceedings throughtout... I really don't see how this could go as quickly as the current leadership at Worldcom thinks it will, but maybe they really do have all their ducks lined up this time. We shall see.
Babar
Close, but no cigar. I've mentioned this before other places, but it needs mentioning again.
The real issue, the one that remained unresolved throughout the 20th century, is this:
Sometimes, there is really nothing to do.
Let that sink in for a minute.
In the 20s, we all got mobile with cars and got wireless with radio (RCA was like Yahoo!).
Once most of the people who wanted model-Ts and vacuum-tube sets had 'em, the market saturated, the bubble burst, and people couldn't figure out what to do.
It took WW-II to get 'em interested in something again. The sequel involving Communists and a space race was pretty exciting too.
Then in the early 90s, no more Commies (none that really mattered, anyway) but that was OK because computers had been rolling along quite nicely (a spinoff of the space race, actually) and the Internet, whoooh boy! That was something.
The first warning sign was when computers actually fell in price. For years, they were about $2000, and they kept getting faster. When they started noticeably dropping in price circa 1997/1998, I remarked that we might be getting saturated. We are now certainly saturated. Almost everybody who wants a PC has one. Almost everybody who wants dial-up Internet in the US has it.
Broadband might have helped us, but this is now an area where the bad economy feeds on itself: consumers won't shell out for broadband when the next paycheck is in doubt. They may even cancel their dialup.
People need something to do. They want something to do.
I believe FDR actually had the right idea with some of his programs--the ones that built lasting infrastructure such as the TVA and Skyline Drive (note, the forced relocation of mountain people was poor execution, but the *idea* of creating a recreational area was a good one). The problem is that GWB is imitating some of FDR's mistakes when it comes to creating *permanent* beurocracies. The biggest of these mistakes was social security, which is just a big Ponzi scheme that has to collapse sooner or later.
When people don't know what to do, government spending can be a viable option, but it needs to be temporary, constructive, and produce something useful. How about grants for commuter rail in cities where it would be appropriate (e.g., full funding for the Las Vegas monorail would be really cool). How about an Apollo type program to create 100 mpg and/or alternative fuel cars that people will actually want to buy?
Instead, we will probably just create a few more government agencies.
War is an option too, but with the US reluctance to actually get involved with postwar reconstruction efforts, it seems like a bad idea. Already, the Afghan government is showing weakness because of our reluctance to really help stabilize it. If Karzai can't maintain power, GWB will be a domestic *and* a foreign failure. I doubt we'll do much better in Iraq. It's a real pity too, because I bet we could *easily* round up 50,000 military-age people who would be willing to go to Afghanistan and keep it clean until the locals learned how to be civilized. It's the old men that don't have the stomach for it these days--a complete reversal from the 1960s.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
And then you have millions of complaints about "big brother".
I believe the next corporation to go under will be AOLTimeWarner. There is no doubt that they are already cooking their books. The management is dumping their shares like crazy and some are even resigning. This is definitely the sign of a company in trouble.