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."

Comments

Meaningless at this point

[Ars-Fartsica]

The stock price already relfects Chapter 11. WorldCom will either re-emerge from Chapter 11 in a year or so, or other telcos will come in and snap up the pieces.

Sidgemore has already said he wants WorldCom to resemble his old baby UUNET more in the future, so anything not related to data transmission is likely on the block.

So, Here's the Question

[Fished]

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.

Re:So, Here's the Question

[stripes]

What about customers as well?

Assuming they are selling a service at a cost that at least covers current costs (ignoring build out a deployment cost!) then either they will keep running it in chap 11 (they can choose to break contracts without peanilty...so they may decide to stop offering a service if they are not making money on it! they can also decide to renogiate any long term contacts they wish, even if they are profitable)....er where was I? Ah, either they will run it in chap 11 and keep running when/if they re-emerge from bankruptcy, or they will sell it off with the infastructure to some company that wants to keep running it.

If the service is not profitable they may try to raise the price, or sell it off, or discontinue it. This is pretty much the golden opertunity for that sort of thing, so if you are getting a "great deal" on something from them, that might not last.

Support your local telemarketers! =^_^=

[dacarr]

People, don't you know that by hanging up on all those MCI telemarketers, you contributed to the ultimate downfall of Worldcom?! How could you! They couldn't make their service any worse than it was because you didn't succumb to telesales!

It's time to upport your local telesales representatives! They're underworked and overpaid! Make them think for their bread and butter!

Bush really dropped the ball

[evilviper]

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.

Re:Bush really dropped the ball

[_Sprocket_]

These execs do things because they don't think they'll get caught, therefore the length of prison sentence is not a factor.

I think its fair to say that these execs either don't think they'll get caught or they manage to convince themselves that what they're doing isn't something they would be prosecuted for. It is almost certain that stiffer penalties would not eliminate future crimes - when has it ever? But that's not the point.

Hundreds of families have had their current and future plans destroyed by these few people's actions. Once caught, they "spend more time at home with family" at their several-milllion dollar residence (or out fishing with son on an undoubtedly expensive boat - both are paraphrased from a local Houston newspaper). If these guys do get nabbed, I really don't care much about jail time. But they sure as hell shouldn't have the rest of their financial lives intact after having destroyed so many other's.

Ultimately, the reason people at this level supposedly justify their income is the level of responsibility they command. They are expected to keep track of a large number of issues and make propper decissions based on these factors. Not everyone can do it - fine. But when you screw up at that level, you should pay. Dearly. That's why you make the big bucks.

Re:Bush really dropped the ball

[Zeinfeld]

You can't blame this on Bush. Or the government. Or the Democrats or the Republicans.Or anybody really but the morons at Worldcom and they're auditing firm who thought this would be a good idea.

The WorldCom bankrupcy is the fault of Bernie Ebbers and his crew. It was the insane greed of the CEO that is the root cause of the problem. I mean who honestly needs more than $10 million a year in salary?

The knock on effect on the rest of the markets however is due to Bush. People have no faith in the markets because of a lack of leadership. Bush is not a leader, he is a sock puppet for the corporate interests that paid to elect him.

The reason why the markets fell in real time while Bush prattled about corporate responsibility is because nobody had any faith in either his commitment to make real changes or his ability to do so. Not only was Bush great pals with 'Kenney Boy' Lay and the Enron crooks, he refuses to sack White who personally looted Enron of $50 million while posting $500 million in phony profits for a division that made a huge loss. Bush got rich by precisely the type of Enron style accounting gimmics that are now discredited.

Worldcom may not be Bush's fault, but it highlights Bush's faults. During the election we were told it was OK to have a Boob as President because the real power would be exercised by his appointees. That claim does not look so hot now that Chenney is under SEC investigation for corrupt accounting at Haliburton while the head of the SEC has had to recuse himself from every major investigation that has taken place under his watch.

The political polls are very interesting. When asked 'do you support the President' the results are statospheric, when asked 'do you support George W Bush' his rating is ten to 15 points lower. When the question is 'who would you vote for in 2004' Bush is actually at only 45%. People are not endorsing Bush, they are endorsing the Presidency.

It is not too suprising that advisers like Karl Rove have been pushing to do anything to distract public opinion. What is suprising is that the media failed to report two terrorist alerts that went out last week except in passing. That tactic at least has worn somewhat thin.

The Press essentially gave the Bush administration a free ride for the first six months and after 9/11 became as subservient as Pravda. Now having built him up they will do their favorite trick of breaking him down.

It was the fraud, not the clueless business plan

[Zeinfeld]

So after Bush gets into the Whitehouse by promising to run the country like a business we suddenly discover how many of the businesses are being run.

While there will be a lot of folk pointing out that WorldCom had massive debts, that is not the primary reason for the chapter 11 filing. The banks would have been happy to go on lending if they could trust the books. The company was actually operating profitably - if the 3.8 billion was the limit of the fraud.

So why does a profitable company cook the books? The timing of the fraud makes it look like it was done to save Bernie Ebbers from going bankrupt personaly. He had taken out a massive loan from the company and used it to buy stock. When the market went south Bernie was left owing a third of a billion he could not repay.

The thing I find personally illuminating about all this business is that it turns out that a lot of high powered accountancy turns out to be incomprehensible for the same reason new age psychobabble is incomprehensible - it is complete bullshit.

The problem we now have is that nobody can trust any accounts, even those not audited by Arthur Andersen. While the accounting tricks were clearly being used to mislead in the Enron/Harken cases there are cases where a company might legitimately use a captive company. Equally it is not necessarily fraud when two companies buy from each other (a related party transaction) but how do you tell the difference between a genuine transaction and a fake one?

The problem that the US now faces is that foreign capital is rushing to get out as fast as it can. That may well cause interest rates to rise as the government is forced to fund the budget deficit with loans at higher and higher rates.

Whichever way you look at it this is the end of the line for corporate deregulation. Regulation is now going to be considered pensioner friendly and stockholder friendly. At the very least we will see the sweatheart deals arranged by Enron and the Gramms to exclude energy derivatives from oversight being swept away. But at the deeper level I think that politicians are not going to be able to score easy votes by dennouncing regulation.

It is very curious the way that the second Bush administration is shaping up so much like the first. Stratospheric popularity after an initially successful war in the middle east, then being mired in financial scandal (savings and loans) and a recession while the budget deficit ballooned.

As someone who has been through this..

[Maeryk]

Well, sort of, anyway. ANyone remember when Inacom tanked? I was working for them at the time.
Luckily, I got picked up by a "competitor" who was also onsite at the same place, so I only had a week of questionability.

THe schematic is slightly different.. Inacom claimed they *might* fold.. they claimed they *MIGHT* declare bankruptcy, and they put themselves on the block to be purchased, in whole or in part. Other groups came in, looked decided "I want part of this, but they are going to crash anyway, so I will just wait and absorb their assets after the crash, rather than paying an inflated (read: more than bottom penny) price for them.

However, what Inacom DID do, was broadcast a message on Wednesday, saying everything was cheery, bankruptcy could be avoided, etc. On Friday we got a voicemail saying "the vast majority of Inacom employees have been let go. Pinkertons (I think.. one of hte security companies) employees will escort you from the site."

We sued, in a class action, for lost wages, and violation of the WARN act.. (if a company knows its tanking, and doesnt tell you, they are liable.) This suit is still in progress, as far as I know. And may be for several years.. seeing ANY money, including 401K money can be tough as well. Once the IRS gets ahold of it, they can hold it pretty much as long as they want. Especially if there was financial malfeasance within the company.. you may also find out your company did not pay as much into the 401, health, insurance, unemployment, as they claimed they had. ANd there is nothing you can do, really, once the corporation folds/loses all its assets. The individuals who ran it are blameless, and it is very very difficult to sue them personally. (Hence, corporations of one.. for that very reason).

Good luck.. hope it all works out for you.. but it is often ugly in the long run.

Maeryk

YES! Four for four!

[rjh]

After graduating college I went to work at MCI, which was soon bought out by WorldCom. WorldCom is now in Chapter 11.

After leaving WorldCom I went to work for McLeodUSA, which soon declared Chapter 11.

After leaving McLeodUSA I went to work for Yomu, which declared Chapter 7.

After leaving Yomu, I went to work for PGP Security, which doesn't even exist anymore.

Score: four for four.

Y'know, most people would be proud of batting 1.000. So why do I feel vaguely embarassed, foolish and ashamed? :)

Re:It was the fraud, not the clueless business pla

[Zeinfeld]

So after Bush gets into the Whitehouse by promising to run the country like a business we suddenly discover how many of the businesses are being run. So how is this a negative, the corporations didn't start cooking the books on election day.

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.

Re:YES! Four for four!

[BJH]

Please, go get a job at Microsoft.

Re:(Slightly OT) Bush's role in today's economy

[Zeinfeld]

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.

You are putting up a straw man here. Nobody is saying that the people with most responsibility for the collapse of Enron, Worldcom and the rest were not the people who ran the companies and their accountant, Arthur Andersen.

However you do expect a President to be able to give a good speech. You do expect a President to make sound proposals for fixing problems. You do expect a President to not have been involved in the same type of corrupt accounting himself.

The problem with Bush is that he has failed on every count. His speech was excrutiating, hypocritical and contained only one concrete policy proposal. He failed to convince the audience that he understood the problem, let alone the solution.