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WorldCom Fraud Doubles
Silvaran writes "No, this isn't a repeat story. WorldCom claims another $3.3 billion accounting error. That's about $7 billion, for those that are counting. Wish I had that kind of cash to miscalculate on my income tax forms." There's also a NYT story. I love how the news outlets are saying, "error", "irregularity", "problem", as if this was all some sort of tragic accident, instead of laying out the obvious truth, "criminal fraud committed with full knowledge it was a crime".
At this rate, I'll never be able to unload this stock.
My biggest feat at night? That the same thing is going to happen to the telecommunications company where *I* work.
Fuck.
I love how the news outlets are saying, "error", "irregularity", "problem",
Those just happen to be the industry terms. The accounting has terms just like the computer industry. And considering that WorldCom executives are being arrested, it is pretty obvious that fraud is involved also. Just another slashdot editor adding his two cents to a post instead of just posting it.
...that you never hear of any accounting 'errors' that make the company look less wealthy than it is?
A pizza of radius z and thickness a has a volume of pi z z a
"A billion here, a billion there - pretty soon it adds up to real money" - one site attributes that to Everett Dirksen
try { do() || do_not(); } catch (JediException err) { yoda(err); }
So theres another $50.6 billion down the hole, too.
What I don't get about telecom, esp. the telecom in my area, QWest, is how the hell they are rolling in money. My phone bill is outrageous... and they have a monopoly in the region. I know they're getting at least $40 out of every person with a phone in the midwest... where the hell does all that money go?
As in 3,300,000,000 $'s, bucks credits ?
You know, I've heard about calculating errors, but
3.3 bill, is not a calculation eror, thats darn gross negligence at beast, villanous stupidity at slightly worse, and punishable by long term jail at worst..
There are countries that make less money than that on their national budgets.
I sit here, and the only way I can react to this is with a slightly disbelieving laugh.. It's so far out it's almost funny in a slight Twilight Zoney way.
Venlig Hilsen / Regards
John Hinge - shayera /
"Buffy I love you... Please God No!" S
The justice department needs to stop being a bunch of whores and realize that "limited liability" has to do with financial, not criminal liability. Fraud is fraud, theft is theft. Put them in the same cell with a guy doing 5 years for forging a check. It makes me sick.
I spent a year in Iraq looking for WMD and all I found was this lousy sig.
1. Used a Pentium to do the calculations
2. Used Excel to do the calculations
I think other posters have already mentioned that they never seem to make mistakes the other way round.
"Oh, crap, we forgot to carry the 1 when we added up the revenue, now we made an extra billion last year. Shit - we'd better give all the regular line employees a pay raise before our headquarters collapses under the weight of all the extra cash"
Like that would ever happen......
The spin by the media is guided by the principle that you are innocent until proven guilty. Thus the "nice" choice of words for the WorldCom bastards who are responsible for this "alleged" fraud.
Worldcom's CFO is already in jail awaiting trial and the company is going bankrupt. The hotest story I am hearing on the streets here in DC is the fact that no one from Enron is in jail yet. This will increasingly stink up the Bush administration since his staff has so many Enron ties. Enron was Ashcroft's largest campaign supporter. Congress passed laws making rules tougher for future wrongdoers but it is not clear to me that the rules needed to be made stronger. Imclone, Worldcom and Adelphia C?Os are already in jail under current laws. Why haven't the laws been applied to anyone at Enron?
Maybe the American press are skirting the issue - but the British press certainly aren't: try
The Guardian ("fraud" appears 5 times) and The Times which even uses the word "scam".
Zack
"... and more and more now there are all kinds of electronic goodies available" -- Pink Floyd 1972
Trustworthy accounting is the BACKBONE of the economy. If investors are not sure they can trust the books of the companies, then they will not invest, companies will not grow, the economy will flounder. The private sector *needs* the government to perform this function. Because the government has failed in its duty to ensure that fraud was not being committed we are now seeing an increased likelihood of a double-dip recession because investors are wary of Who's Next.
I love you free-market people spouting off about how evil the government is, when it's too much free in the market that has the US economy in trouble.
While we're at it, let's decentralize both the national government *and* fat, monopolistic corporations. Too much waste and economic torture on both accounts!
Steve Magruder, Metro Foodist
the obvious truth, "criminal fraud committed with full knowledge it was a crime".
We call this Libel / Slander.
ATH0 Bitcoin: 1DnwFLXczVZV8kLJbMYoheUrpqHesjxrSi
I can just see it now...
"
Top Story of the day! Today WorldCom states that indeed, it has never earned a profit at all, explaining that what they had previously thought was only an error of about $7 billion, actually was much more.
'Apparently after some more thorough investigation, not only has WorldCom never turned a profit, but all figures that could have been called profit were in personal bank accounts in the Swiss. We found that 90% of all documents pertaining to the company were also forged... leading us to believe that the very existance of WorldCom maybe fraudulent,' explains an investigator.
Another investigator merely states, 'It's just a front used to collect money. Now they owe everyone everything that they've ever taken in.'
"
Uhh... The US economy is not in trouble, its in a recession. They happen. Then things level out and growth occurs, again.
This is why the US has BILLIONS to give to nations crippled by socialism and communism. This is why any time there is a problem in the Middle East, the World looks to the US.
Its not like the US is going to fold because of this. Its freedom in our market that has led to all the most important inventions of the past 100 years.
I know, you hope the free market and capitalism folds, but its just not gonna happen. Sorry.
[FromTheMorning]
So what your saying is that the government should turn a blind eye? That would be like saying ignore murders to bring down the offical murder rate. Ignoring it may help you now, but in the medium to long term you're going to end up fsk'd. Who do you suggest investigate the companies, Anderson consulting?
The whole point of private enterprise is that it's meant to be more efficient than public enterprise hence governments being corrupt and inefficient is a given. The problem with the US is that where business ends and where government begines is blured.
The reason for this might be that news outlets are small parts of much larger companies, who also happen to be vulnerable to the rise and fall of the market. If you take a look at any of your major news sources, you will find that they are also fully-owned subsidiaries of large megacorps. Controlling the spin on the stock market in general is in the best interest of those who are directly affected by the public's confidence in investing in corporate stock.
For the most part, corporate news has long since quietly renounced its role as public watchdog, and is now little more than a marketing arm for its new masters.
-- lk t lv ll th vwls t f wrds. T svs lts f tm t wrt bt ts pn n th ss t rd nd mks m lk lk cmplt dpsht.
The IRS threatened to CASTRATE me for misscalcuating 33 bucks on my Mass. income taxes. Apparently though if your a full time accountant for Worldcom you can let 3.3 BILLION slide for 3 years!!!?!?!?!? wtf?
Worldcom is based in Mississippi? Well why didn't they just say so.
The missing money? It's buried in mason jars out behind the shed. Sheesh.
-S
--- What parts of "shall make no law", "shall not be infringed", and "shall not be violated" don't you understand?
Comment removed based on user account deletion
While Dubya may be a doofus, he at least knows how to put his finger to the wind, much like his old man did, in the past he was leaning off his buddy Ken, but now that the winds have shifted, Kenny and company are just waiting in the on deck circle.
What I've been reading about the whole Enron thing, it's not a matter of figuring out who the bad guys are, but unravelling everything enough to have a clear picture to take to a grand jury. The "accounting practices" of WorldCom, Global Crossing, Adelphia, etc. are pretty blatant. Enron takes this to a whole new level.
Imagine a 4500 machine network wired by a pack of monkeys hopped up crack, crystal meth, and mescaline, and you'll have a pretty good idea of how convoluted the shell game that Enron was running was. Ken Lay and his boys are going down, it's just going to take awhile to untangle the wiring.
Not that Dubya wouldn't cover for him if he could, but that would be total political suicide.
Wu-Tang Name: Half-Cut Skeleton Get your own Wu-Na
I defy anyone to come in here and deny they ever miscounted change.
I realize that $3.3 billion sounds like a lot to the average person..
You have to remember that we aren't talking about REAL money here
I did not have fraud with that corporation.
If you aren't part of the solution, there is good money to be made prolonging the problem
About forty years ago, it looked like Lockheed was going to go bankrupt. The stock fell from $60 to $3, which was below par (i.e. breaking up the company and selling off the assets would have recovered more money than the stock was selling for). The problem was that Lockheed wasn't just a defense contractor, it was the defense contractor, and during the height of the cold war, to boot. They couldn't be allowed to go bankrupt.
So the government bailed them out.
Then, some years later, there was a little problem at a generating plant owned by General Public Utilities (GPU). You might not have heard of GPU but you've heard of the plant: Three Mile Island. GPU stock took a hit, as you might imagine. In fact it looked like it might go broke. The problem was that it was a utility, which means it was a monopoly. If it went broke the lights went out over a fair stretch of countryside. That couldn't happen.
So the government bailed them out.
Now, my father saw both of those coming. He bought Lockheed stock at fire-sale prices because he knew that they couldn't be allowed to go broke. He cried because he couldn't afford more. He made out like a bandit.
When GPU started to go under, he bought all the GPU stock he could. And this time, he could afford more. He made out like a bandit. So well, in fact, that he assured himself a comfortable retirement. He's quite conservative, and told me ruefully, "I always preached the values of thrift and economy. Now I'm comfortable in my old age, but it isn't due to any of that. Hmph."
Then the Seattle public utility, through a boring series of blunders, started to go broke. They couldn't be allowed to go broke, for the same reasons that GPU couldn't and Lockheed couldn't.
So the government...said "Hey! Wait just a darn minute here!" And didn't bail them out.
And they went broke. And the lights stayed on.
Ditto when California started having rolling blackouts. Big raspberries from the Fed, because the Shrub knows California wouldn't vote for him if he was rolling out the red carpet in front of Jesus Christ for the Second Coming. Much stick-waving, stunningly bad contracting, and shouting, but the lights came back on and stayed that way.
The days of government bailouts are over.
Does it go on forever?
their old pentium, ;-)
they would never had such errors'
I swear your honnor! I only rounded to the nearest decimal!
I'd rather be sailing...
The South Korean government started cracking down on their notoriously corrupt companies some time ago. Compare their overall stock market performance to that of the US recently. You'll wish you'd had your money in Seoul...
Strangely, Michael, it is a convention of the "old media" that one does not refer to someone as having committed a "criminal fraud committed with full knowledge it was a crime" until that person has been found guilty in a court of having done so.
For Christ's sake. Why don't you just go the whole hog and shout "Get a rope! Let's lynch the bastards now!".
If slashdot posters started referring to Michael's "libellous editorial comments committed with full knowledge that he was libelling someone" rather than "stupid remarks", "arrogant editorialising" or whatever, you'd be out of a job in no time.
-- the most controversial site on the Web
Remember what happened to Robespierre after he lopped the heads off of all the "deserving" aristocrats, my friend, before you start walking down that path. That path leads directly to dictatorship. (Cue picture of short Corscican with "La Marseillaise" playing behind it.)
You can only drink 30 or 40 glasses of beer a day, no matter how rich you are.
-- Colonel Adolphus Busch
It's going to be interesting to see if/how the US Govt steps in to support WorldCom
With as much infrastructure as Worldcom owns, I seriously doubt GW Bush and the other Corporate Cronies on the Hill will allow it to simply collapse. I suppose if you have an extra $200 it might not be a bad idea to buy some Worldcom stock, at its current price, you could get 1000+ shares. Worst case scenario, you loose $200, but is possible, after a bailout, the stock price will goto $10 a share in a few years or they will be bought out and you will end up with 5 shares of AT&T or something. This is simply theory, and I am no expert, so if you invest your life savings in Worldcom and then it does simply collapse, don't blame me, you shouldn't be taking investment advice from Slashdot.
"Our products just aren't engineered for security,"
-Brian Valentine,VP in charge of MS Windows Development
broke the internet camels back.
Speaking of taxes...
I'm guessing WorldCom gets back their tax paid on their overreported income?
If so, it's really to their advantage to dig up as much overreporting as they possibly can, now that it's out of the bag and they can't hurt any worse for it.
Maybe they can find enough overreporting that they will be able to claim a profit again this year... after classifying their tax refund as income, of course...
-- Terry
From the article at news.com.com:
So... $3.3x10^9 + $3.3x10^9 > $7x10^9 ??
WTF kind of math are these auditors using???
You see? You see? Your stupid minds! Stupid! Stupid!
(1) Why isn't every single member of Worldcom's Board of Directors in jail right now? So its okay to throw some kid in jail for cracking some piss poor encryption on a PDF file - but its not so okay to throw some suit in jail that knowingly stole billions upon billions of dollars from investors?
(2) Why hasn't Worldcom's stock been delisted? I mean comeon now - I think its about time to hang up the saddle and go on home because this horse isn't getting back up.
(3) Why is Worldcom being allowed to write off 50 billion dollars (as mentioned earlier) in addition to the 7 billion they already stole? I think Bernie Ebbers and friends better get out to the street corner and start "sucking it up" so he can play these people BACK.
(4) And once again - WHY AREN'T THESE FSCKING IDIOTS IN JAIL? If I bounce a check for 100 bucks I'm sure to face the consequences - yet if they "steal" 7 billion dollars its okay?
J
I love idealists not because I am one, but because they make life bearable for pragmatists such as myself.
Send those bastards to a federal pound-me-in-the-ass prison.
Gamingmuseum.com: Give your 3D accelerator a rest.
It's mostly like a uniform anywhere else. I'm not a slave; I can leave work anytime I want, and I do get paid for *working* here. Then again I don't wear button down shirts every day. I usually wear khaki's and a golf shirt, but that's pretty much what I always wear when I'm not working out.
The idea is just to look professional and conforming to business protocol. Working in a corporation is all about business protocol, and looking like you are focused on your work is part of it. In a conforming situation like functioning in a corporate environment, wearing a uniform is part of being focused on your work; Just like working at mcdonalds, a local restuarant where you have to wear a white shirt and black pants, or a school that has uniforms.
Do you have some other group of people you'd recommend we corporate slaves dress like? It's just one group of conformity to the other. I'd rather just put on some clothes and get on with my life instead of worrying about my material shell appearance. There are much more important issue to address corporations and their effect on society and people than how they make people dress.
Then again, I've never been one to compromise my success or enjoyment of life by being rebelliously self expressive through what I wear. I just don't think the trade off is worth it. I'd rather speak my mind and influence other people's opinions than dressing like a punk, especially when I like the clothes I wear.
This is my sig. The post is over.
In related news, the federal government has reversed the Greene decision, and is putting the pieces of AT&T back together. Government sources are quoted as saying "What the heck were we thinking!?!?".
-- Terry
I know that the Worldcom issue is not quite this simple. Worldcom was writing off operating expenses as capital investments. I also can't believe that I am advocating higher taxes, but...
During this bubble, companies were doing everything that they could to overstate earnings.
I do exactly the opposite with my company. I hire a sharp accountant to make my profits legally look as small as possible. I have to write a big fat check to the IRS at the end of the year for my profits. I certainly wouldn't want to overstate them.
It also seems to me that if I was pulling this kind of stuff I would be in a federal pound you in the ass type of prison already.
Go on, then, explain to the court how the capitalisation of local line costs in de novo telecom operations is the wrong accounting policy. Then prove that it is so obviously the wrong accounting policy that no reasonable man could have thought otherwise. Then prove that the particular officers of WorldCom who are up for trial were the ones responsible for the adoption of this policy, rather than auditors, consultants, other managers. Then prove that they adopted it with the intent to commit criminal fraud. Then, maybe, you'll have some credibility in your glib assertion that the defendant is guilty without need for a trial. This is a complex case, and the assertion that the defendants are guilty of criminal fraud (rather than of some lesser offence of the kind generically described as "accounting irregularities") is not supportable.
-- the most controversial site on the Web
Considering that AT&T is trading at 9.80 today, spending $200 for 5 shares isn't such a great deal. I follow your idea though, this is a pretty low risk that could pay off down the line if you're willing to gamble.
What bugs me the most about all this is how people still don't seem to make a big deal about it. Here's a good way to think:
Imagine every crime that has been committed against you that cost you money. This can include having your bicycle stolen, your car stolen for a joyride and crashed into a wall... your house vandalized and your stereo ripped off, your credit card number hijacked, your wallet taken in a mugging, etc. Whatever cost you money. Now, try to remember the anger. Try to remember how pissed off you were. How much you would've loved to bash the punk's face in with a brick.
Now listen.
Corporate crime has stolen about twice that from you, and other investors and tax payers. You are an invesor if you have a retirement plan. You are a taxpayer if you have a job. Even if you don't in either case, your sales taxes go to governments, and governments are effected by the stock market. The total monetary cost per year of street crime in the United States is well below the total amount of money lost due to white collar corporate crime. That is money you should have in your assets right now.
The thief, the mugger, at least they have some balls about it - if you catch them, you could very well bash their faces in with a brick, then get them arrested by the police (who kick the living crap out of them if they try to run) and then end up in a federal "pound me in the ass" prison for quite a long time.
The white collar criminal is not caught. If he is, his company gets fined something around 1% of their earnings this quarter. If he personally is caught, he just gets sent to a minimum security country club for a few months.
And people don't seem very mad about this.
Income smoothing was a problem for Microsoft too.
Here's a Seattle Times article talking about the settlement.
This is why the US has BILLIONS to give to nations crippled by socialism and communism.
Assuming the US actually has that money in the first place. The US currently has a budget deficit measured in the trillions of dollers. Also the first time I have heard Israel described as "crippled by socialism and communism."
This is why any time there is a problem in the Middle East, the World looks to the US.
Not usually to provide money, probably more often top stop providing money.
The only thing is, the government refused to own up to their part in the whole scandal: they assisted and turned a blind eye to their corporate and banking misconduct for years, and took kickbacks and bribes from all the parties involved. I was over there during the whole time that the IMF was helping them out of their economic hole, and they called the downturn and rebuilding of their economy "The IMF Era", as if their problems were all the IMF's fault.
Are they better off now than they were? Heck yeah. Have the root causes been addressed? Nope, just gone underground for a few years. Mark my words, in five to ten years, the ROK will go through the whole thing all over again.
Wu-Tang Name: Half-Cut Skeleton Get your own Wu-Na
you know, while americans try to play polititcs with this, here's a thought to consider. the us needs investment from foreign countries. my pension is invested in us stocks and yet i live in ireland. however once the market creeps up a bit, that money gets invested elsewhere.
the us gov't continues to be more and more business friendly, and yet in reality that's bad for business in most cases. if i as an investor don't see that changing, i don't put my money in. and i'm not alone.
US Citizen living abroad? Register to vote!
Sounds like Stockholm Syndrome to me...
Right on the money.
Wu-Tang Name: Half-Cut Skeleton Get your own Wu-Na
Oh puhlease. Anybody watching sitcoms or movies over the last 10 years can see how being manipulative and bordering on cheating is *A-OK* so long as you dont get caught.
.. just because the law says this or that doesn't mean, as people, we should put up with shit.
All this is a fallout of a huge social mindset where your gain at somebody else's pain is the whole freakin point of life! (Right? Thats business! Competition! It's good for the world!)
Seriously, this is a social problem. It pains me to admit that people will denounce these CEOs and then laugh about having tricked or fooled their way into some advantage in the same breath.
The answer to all of this applies to everybody equal: ETHICS, YOU MORONS. If we just started taking a harder line against fudging rules just because you *can*, we likely wouldn't raise the type of leaders that do this. But its gotta start at the bottom. Laws have to reflect the bahviour of society - they do not change that behaviour in a conditioned social body.
To that end, dont put up with people cackling mealevolantly about how they scammed the cable company or their neighbour into some gain. Nobody is above the *intent* of ethics and laws
I say, bring the public stocks back. I think its high time to make public humiliation an effective deterrant of unethical behaviour.
"Old man yells at systemd"
Can anyone say The Cayman Islands?
It is theft, pure and simple. You give them money so that they will grow a company for profit, and then with no regulation to watch that money, they funnel it to some tax haven and then lie to you about what it is doing. It is no different than paying for something in the mail and it never arrives, because the jerks have already skipped out with the cash.
Either way, if they go to "golf prison" or not, they come out and they will have money to play with for the rest of their lives.
*AND NOW MY POLITICAL SOAPBOX* (please disregard if you do not agree)
Please don't vote Republican again because we are in the middle of a "terrorist crisis." Its not good for you... Mr. and Mrs. John Q. Public.
This is what happens when you take all of the restrictions off of business. I am not for restriced business, but I am defineitely not for what they have been getting away with. If they are doing this to people who spend their paychecks on a better future with this company, then what do you think they are doing with the environment? What about a little safety regulations to protect an employee?
Let's keep in mind that our Republican friends constantly say that they want to "run the Government like a business."
The last time I checked, that meant charging too much, underpaying the working stiffs, and playing golf on the profits for the handfull of winners. Good luck.
...they'd blame this on the Pentium floating-point bug.
:wq
Are we talking about the same Times? I think my friend is referring to the London Times here.
Please give us some examples of the "well-documented history of sensationalizing " the Times indulges in.
Certainly the New York Times has a more glamourous, brash look to it, the last time I read it (last over in February).
I have to agree that the UK tabloid press are some of the most appalling rags in Europe, perhaps it is these you refer to?
The Guardian is mildly left of centre which would probably annoy most of the slashdot US readership from a political perspective, but hardlt a gutter rag, and The Times is one of the most establishment, conservative papers around.
Looking forward to hearing your examples...
With as much infrastructure as Worldcom owns, I seriously doubt GW Bush and the other Corporate Cronies on the Hill will allow it to simply collapse.
Not going to happen. #1, Republicans would get crucified for it, and #2, we're generally content to let the geniuses who got caught in their own mess swing in the wind. That goes double if they've done anything to embarrass us.
Watch Warren Buffet. He's using his stake in L3 Communications as a launching pad for other telecom acquisitions. If he sees anything interesting in the Worldcom wreckage, he'll probably buy it. If he doesn't, someone else probably will.
Here's what I don't understand. This kind of crap is EXACTLY why we have "auditors" who are supposed to validate a company's books. We've got all kinds of news stories about bad CEOs going to jail. I don't have a problem with that. I have a HUGE problem with the fact the no auditing company's CEO has been sent away yet. The accounting companies conspired to hide all these losses and artificially inflate these bogus companies stocks.
I used to work for a Big Five accounting firm (not Andersen) and I did a variety of work -- tax consulting, mostly, but also some auditing. I am both an accountant and an attorney. I have left the tax world for the general practice of law, and despite all the lawyer jokes to the contrary, I feel "cleaner" about what I do now (mostly chasing ambulances). I would never have guessed that if you asked me about it when I graduated from law school lo those many years ago.
/. readers from other countries, I hope you aren't getting too giddy about this. The simple fact is that many, many studies have been done about transparency of financial reporting and business ethics. The US is always at or near the top of those studies in having transparent accounting/reporting and having a reasonably honest system. In the present, only a tiny, tiny fraction of publically-traded companies have been affected by this, and I think the worst is over. I think overseas investors should wonder about what is being concealed on the books of some of their companies. Japan's banks' problems are widely known, but I throw that out there as an example. I will bet that it is not just the US affected by this -- the US is simply the most prominent place where it is going on. The fact that many people around the world like to watch the US get it in the crotch from time to time doesn't hurt the publicity, either. Especially after so much nationalistic chest-thumping from the US about its place in the world lately. I understand the schaden freude, but I don't necessarily think that the smugness associated with it is really very wise.
Here is my spin on the Worldcom situation:
1. Auditors will never, I repeat, never, catch outright fraud at companies they audit if the company is actively trying to deceive the auditors. Auditors look at only a fraction of financial records of a company, and if certain transactions are concealed or are outright misrepresented by the audited company's employees, it is extremely difficult to get to the bottom of the situation. Auditing is, reduced to its bare essence, statistical sampling of transactions with the sampling focused on major items and a certain percentage of the "ordinary" transactions. At a large company like Worldcom, it would be relatively simple for the CFO to completely fool the auditors (most CFOs come from the public accounting world and know very well the game that they are trying to cheat at).
2. Audits do not pass on the quality of a business, they simply try to determine if a company has followed "generally accepted" financial accounting practices as promulgated by the financial accounting standards board FASB - located in CT, home to Joe Lieberman who fought vigorously an attempt to reform accounting back in 1995, btw -- it's not just Harvey Pitt and the GOP Enron cronies at work here - the whole system is rotten. Shareholders who expect auditors to let them know a business model sucks will be waiting a long time and they are exhibiting pathological ignorance.
3. Of all the big accounting problems rearing their heads, a disproportionate number are coming out of Andersen audits. KPMG, PWC, E&Y, and C&L are all mostly avoiding the maelstrom. Why? The culture at Andersen? Leadership at Andersen? I honestly do not know, but it is striking that Andersen is auditing most of the problem children of the stock market.
I know people at Andersen at all levels who are smart, diligent, and honest. I have worked with many folks from Andersen. People move from Big Five firm to Big Five firm all the time, so there's no inherent "you are evil if you audit for Andersen" rule. I am at a complete loss to explain why Andersen is in the neighborhood at the time all these arsons are taking place, but it seems peculiar.
4. The changes recently enacted by the Congress and GW prohibiting consulting and auditing to be done by the same firm will do bupkus to stop accounting problems. The biggest source of accounting fraud results from the company misleading auditors. "Aren't the outside auditors professionals? Can't they see through the frauds?" The simple answer is, no, they can't under most circumstances where they are being wilfully mislead by the audited company. Outside audits are simply not as good a method for identifying fraud as the public perception makes them out to be.
5. Something I have seen pushed hard by accounting firms is what is called an accounting "product." Accountants have things they sell to companies and their work involves "deliverables." It is first and foremost a business.
What are the "deliverables" that I am now most vividly recalling? Ways to move debt off of balance sheets by arranging lease purchase agreements. Setting up subsidiaries to hold assets that drag on earnings growth. The thing is that these sorts of strategies complied with FASB rules for GAAP. The Big Five became more and more aggressive at coming up with and pushing these strategies. Nothing was more desirable than going into a company you audited with something that could add a cent or two to EPS while following GAAP and then billing $20 million dollars for it. There were (and are, I am sure) national sales teams pushing the hell out of these things.
What is the significance? The underlying businesses of the companies that purchased these products did not change. The reported earnings appeared to be growing or growing faster with no substantive change in the quality of the audited business. Especially at a time where P/E multiples were at record historical levels, an added cent or two could result in billions (BILLIONS) of added market capitalization. Combine that with the enormous amount of stock options offered to management level folks, and you begin to see why these "accounting products" were so popular -- accounting firms got huge fees, execs got enormous increases in the value of the shares/unexercised options, and the cost to the audited business was a pittance in comparison.
Your average investor knew nothing about this. The average brokerage firm analyst probably knew less than s/he should have. Finance majors know very little about accounting and generally end up on Wall Street sneering at their boring(!) friends who majored in accounting who largely go to the financial accounting world. The result is that the audited companies (and their management) were in the middle knowing pretty much the whole story while trying to mislead investors and analysts (who have their own house to clean, btw).
The fact that all of this took place during one of the biggest bubbles in the history of american financial markets only exacerbated the problem.
For
Long enough, back to work. So many people to sue, so little time. (that's a joke, people)
Lots of petrified grits
Unfortunately, I really think this is a case of the American people stuck with an ugly reality: there will be no litigating or lawmaking or innovating out of this problem.
The answer is to raise your kids ethically - even if other people lie and cheat, if you give up and join the party, you only contribute to this problem. Personally, there seems to have been a large increase in the glorification in popular culture of cheating and scamming and basically 'getting a leg up' on people in less fortunate positions than themselves. The popularization of the phrase "Bling-Bling" or "Show Me the Money" says it all.
America has become a hotbed of wealthy-ego-stroking minions. People seem to only believe those in positions of wealth, as if they deserved to get there and as if the world is truely a fair and just place.
If we could try and raise our populous slightly more Robin-Hoodish (distrust those in positions of wealth - if they deserve or have the capability to be there, they will remain despite you not giving them benifits of doubts), and generally make the social heros those who are honest, ethical, and only 'scam' (exploit rule loopholes in order to gain) people who can afford to be scammed, we'd be in a much better position.
As it is, it seems that the lower and middle class really seems to have an addiction to playing the lap dog to corperations exploiting that dumb loyalty. Wake up folks and try and raise your kids a little more well versed in the knowledge that the world is not a fair place and that those in positions of extreme wealth dont need any cheerleaders. How willingly they purchase services and products at brand-name inflated margins, and then allay blame to economic problems to the government, with a little gentle proding from the private sector. (Most notably, the libertarians seem to have a hard time blaming the puppeteers, the private sector bohemoths, instead often wrongfully accusing the puppet, the government.)
And how does this help the investors? The investors are us! Lets help each other instead of trying to screw each other, and the corperate culture will fall in relative (as in, better than now) lock step at some point down the road.
"Old man yells at systemd"
it's not the clothes I dislike, it's the lack of options.
I also dislike being treated as if I don't know how to dress myself. (I'm not married either)
You are clueless, completely clueless. The current economy that Mr. Bush has inherited was created during a Democratic administration, so if it's anyone's fault it is Clinton's.
With that said, I agree with the other stuff you said. I do not think government should be run like a business, large businesses are usually just as corrupt and inefficient as government. Big businesses grow and grow, just like government. Government needs to be kept on reigns, it needs to be constantly poked and prodded by the people to keep it from getting too large and out of control, like it currently is to the extreme.
So, don't vote Republican if you don't want, but for the love of all that is good, don't vote fucking Democratic either!
Keep in mind, it's the Democrats who have done more to harm "your right online". The DMCA had more support among Democrats, and so do the new CBDTA^H^H^H^H^Hrights removal type laws.
Sticking feathers up your butt does not make you a chicken - Tyler Durden
No, a minimum-security prison is no picnic. I have a client in there right now. He says, the trick is kick someone's ass the first day, or become somebody's bitch. Then everything will be alright.
</officespace>
LOL - maybe they should just dress how their employer wants them to dress, earn their pay, and get on with their life after work. Who gives a crap how they have to dress at work? Not me.
Besides, a pair of casual work slacks is cheaper than a pair of 501's these days.
This one is easy: People have a tendancy to believe the world is 'fair'. (I think phsycology textbooks call it the 'just world' phenomenom.) So, the rich folks who commit crimes cant be all that bad - after all, they're rich, so they must do something right. The bike theif obviously has nothing more than bikes as his revenue stream, so he's obviously worthless to society and doesn't deserve any benifit of doubt or sympathy.
.. this is why I want to punch people who immediately place faith in those in power without doing their homework. Just because you're a leader doesn't neccessarily mean that you have constributed to society in a more positive way than some homeless dude. Sometimes, yes, sometimes no, but for those who don't spend any brain cycles on determining who deserves your angst, considering both the attribtion (personality) *and* disposition (environment in which behaviour in question was undertaken), their opinions are simply the stuffed ballots and "me too" posts of public opinion. And, as noted above, usually people will side (understantably, but not unforgivably) on the dude with more wealth.
Thats why people will forever feel less upset about White Collar crime (other than the obvious optics issues)
"Old man yells at systemd"
"Wish I had that kind of cash to miscalculate on my income tax forms."
It isn't cash. It's earnings that were booked when they shouldn't have been. Good ol' matching principle.
Slashdot needs a review in accounting, commercial law, bankruptcy, etc....
Yeah, but your entire argument rests on the concept that people 'earn' their wealth. If you truely believe that, then we're at odds from the start. The extremes of the wealth chasm one can have *requires* a bias from the beginning of one's 'earning' cycle. George Bush wouldn't have 'earned' his wealth had he not been socially connected to people who could front him capital. Similarly, a homeless guy earning his homeless is not often because 'he threw it all away' but more often connected to the kind of people and life lessons he was subject to since birth.
(Nevermind that the legality of inherited wealth completely breaks your argument - certainly you cant say I earned that 10 grand my grandmother left me that catapults me above the wealth of my peers?)
No, obviously Robin Hood didn't do the 'right' thing. But I'd certainly be much more tolerant (as would any society with many poor, I would think) of his behaviour than that of the King (who already has the advantages of being able to set the rules.) I really dont believe people 'earn' their status in life - I think you have a top and a bottom you can reach, givin your situation from birth. But think about it - Bush (or Clinton, or Martha Stewart) couldn't 'earn' homeless even if they tried (unless maybe they started killing little babies or something.)
Thats my problem. Everyone gets a bias from birth as to their 'earning' potential, and I am a firm believer that as a social body, our job is to provide the checks and balances in order to try to equalize that bias on a case or group by group situation.
Laws which allow one to become 'poor' do help those that truely need it. Sure, people scam the system, but I'm willing to take that loss in order to help those who genuinely deserve it. I'm of the impression that you dont mind throwing out the babes with the bathwaters. Especially if capitalism is designed to bring everybody up in wealth - well, thats going to include people who dont deserve it, so being procapitalist under the guise of wanting to increase the quality of life of the world is really no more 'costly' than supporting some lazy scammers to ensure that those who truely need help get help.
I really wish psychology was taught more often in schools. There are many factors wrt the human condition and wrt to the whole disposition/attribution blame game that would likely change many people's worldview.
"Old man yells at systemd"
One day I had to stop by the School of the Art Institute of Chicago to pick up paintings from my girlfriend's locker. I zipped over after worked dressed in my suit and tie. I got lots of nasty comments about my clothing and about being a "corporate drone".
Funny thing was, every person there was wearing black cotton from head to toe, red Converse All-Stars, had either punk-red hair or at least a streak of red down the middle, and was smoking a clove cigarette. Every one.
Talk about drones. From that day on I never even bothered to listen to anyone's opinion of my clothing choice!
sPh
This is bad not just for the US, but for a whole lot of other economies in other countries.
Just as an example, VSNL, a semi-govt. owned organization in India and the biggest ISP, had deals worth billions with WorldCom.
Now, VSNL is unsure whether it would get the services or the money. The crux of the matter is that this would affect the shares here a whole lot more, since there are a lot of companies that use the services from VSNL, which in itself is paid for.
And unfortunately, who pays for this? The second and third tier customers in developing countries, who have to endure a whole lot more than their counterparts. Because, they too would be accountable, and I'm just waiting for the VSNL stock prices to plummet, along with others.
I think the executives of Multinationals should be held responsible and should be put to something of an international tribunal that analyses the consequences of their actions, worldwide.
Maybe the punishment should be to throw them in some third world country's prison with hardly a square meal a day and no water to drink, then they'd understand what the hell they were doing.
Funny. I was just thinking the same thing about a much larger class of thieves. You see, corporate criminals haven't stolen nearly as much from me as government con artists.
Funnier still, because I couldn't understand WCOM's books (nor the books of any other telco), I didn't buy their shares. I'm breaking even so far this year, after being up the past two years.
Yeah yeah, enough bragging. You see, the reason I was able to do this is because nobody put a gun to my head and forced me to by WCOM.
What went down at WCOM and ENE (Enron) sucked major ass. $10B frauds resulted into hundred-billion-dollar quantities of market-cap-ass being sucked. But Which is worse - Social Security or WorldCom? Social Security is a $13 trillion dollar black hole of unfunded liabilities. (That's accountant-speak for "debt that we've managed to hide from the balance sheet to the tune of about $45,000 for every man, woman, and child in the States".)
Unlike WCOM and ENE, if you don't pony up 6.5% of your salary every year into the scam (oh, and another 6.5% from your employer, for a total of 13% if you have the gall to work for yourself), people with guns will take it from you. Since when did Bernie Ebbers put a gun to your head and force you to buy his stock?
And unlike WCOM and ENE, who, when their frauds were exposed, were crushed - and their accomplices at Arthur Andersen in the process, SS is still in business.
Just like WCOM and ENE, Social Security is all about off-balance-sheet financing.
I'm not gonna pretend that a webzine like "capitalismmagazine" is unbiased (hell, they're a bunch of raving l00ny randroids, but some of their less-political articles, such as this one on Intel and this one on old-school investing are great) - but if you can dig through the rhetoric and politics, you might realize that if it's fraud and theft you wanna eliminate, we need to remove the two-by-four in Social Security's eye before we can see clearly enough to expose the grit in Worldcom's eye.
> And people don't seem very mad about this.
People are mad - and rightly so - about corporate fraud. And Congress is responding, because it's an election year.
I just wish people realized where the real fraud was being perpetrated, and force Congress to do something about that, too.
There was a Senator once who said something along the lines of, "A billion here, a billion there, pretty soon you're talking about real money."
Be who you are...and be it in style!
the difference was that you probably wouldn't have been wearing a suit if your corporate master hadn't told you to. They may have conformed to each other, but they chose to do so.
The evil of Conforming by choice is less than that of Conforming for money. And choosing to be in an environment where you are forced to conform in appearance shows a lack of self-respect.
It goes into twenty to fifty $250 rounds of golf at Hilton Head Golf Club under the guise of a "management retreat."
It goes into the corporate learjet that whisks some of these officers away to the above two destinations.
It goes into the CEO's million dollar annual pension whether he retires a hero or gets the pink slip for delivering his company to chapter 11.
It trickles...straight up.
The tragedy isn't that this stuff happens. It is part of the human condition. Admit it. Most of us would do the same if we were in these fuckers shoes. The real tragedy is that we won't challenge this behavior until it is too late to make meaningful amends. Think Charles Dickens.
Uuuuh, Mr. Powell, it's a $70 billion debt, now. Maybe the problem is that we have an FCC chairman who's OPTIMISTIC about the future of Worldcom, and makes lame excuses saying "don't blame me for being optimistic". We blame you for being an idiot, because you're an optimistic corporate suck-up.
Take a look and feel free: http://www.PieMenu.com
D'oh, right, got it the wrong way around. Thanks for the correction.
"Old man yells at systemd"
If getting business after business bailed out at taxpayer expense qualifies you as being "morally and ethically correct," I guess Bush is.
If being AWOL during your time in the National Guard (which coincided with the Vietnam War) qualifies you as being "morally and ethically correct," I guess Bush is.
If killing more people in Afghanistan than were killed in the World Trade Center qualifies you as being "morally and ethically correct," I guess Bush is.
If getting in the White House by winning a lawsuit after depriving thousands of their right to vote, qualifies you as being "morally and ethically correct," I guess Bush is.
Research the Bush family a little bit. Find out about Laura Bush's homicide via hit and run. Notice what agency G.W.H. Bush headed in the 1970s. Find out where Prescott Bush got his money from. Look at how much the Carlyle Group and Halliburton have received as a result of the W.'s war. See if you still think they're qualifies you as being "morally and ethically correct."
-- haaz.
Bush, put your money where your mouth is
MADISON, Mississippi (CNN) -- In the shadow of WorldCom's headquarters Wednesday, President Bush assured voters -- some of who had lost their jobs, pensions and even life savings when the telecommunications filed for bankruptcy -- that the days of such corporate irresponsibility are over.
'nuff said
At least in the U.S., opinion pieces are [usually] clearly marked as such.
They sure are. Typical markings denoting an opinion piece include "CNN", "Washington Post", and "MSNBC".
Please. Take a typical news story, any news story, and tell me you honestly can't see the bias and slant. Look at the use of loaded words and phrases. There's no such thing as journalism any more; it's all opinions.
The phrase "journalistic integrity" no longer has any meaning, and those pompous and pretentious novelists who pretend they are genuine journalists should take a typical high-school journalism class to be reminded what it is they're supposed to do.
Maybe it was a $3.3 billion accounting error in the opposite direction, cancelling out their earlier mistake?
If you're not careful, mass media comment that the defendant in a criminal trial is guilty can be taken to be contempt of court. It certainly makes it much more difficult to find a jury that can give the defendant a fair trial, and is in general a rather shitty thing to do.
-- the most controversial site on the Web
Didn't say "all" of them. Just one. Also, I'm not sure that we're not already living under a corporate dictatorship.
Steve Magruder, Metro Foodist
Representative democracy? Where? Even if the US had that, it doesn't even begin to address the people's issues. Further, it's nice to see more drivel that's essentially the hobgoblins of mob rule. Yes, Virginia, you can have more direct democracy *and* a constitution too.
Steve Magruder, Metro Foodist
"Focus on one's work" is a demonstrated activity that has nothing to do with "uniform" or "uniformity." Further, many businesses allow "business casual"--a good compromise that doesn't negatively effect the work of any professional.
Of course, it's always interesting to see slaves rationalize their slavery.
Steve Magruder, Metro Foodist
Yeah, don't get me wrong - I'd like to see them breaking rocks too. They earned it.
It's nobody's job but mine to protect me from my own stupidity.
> The stock market can have higher returns than safer investments, but it can also go DOWN. The risk is the price you pay for a possibility of a higher return. The stock market is NOT significantly different than going to a casino and gambling!
But here, I'm gonna call "Bullshit" on ya.
For every casino game other than Blackjack, the math proves the House has an advantage. You will lose. (And if you play Blackjack well enough to guarantee a win, they'll spot it and kick you out for counting cards :-)
> Would you gamble your life savings in a casino?? No, I don't think you would! Then why are you doing it in the stock market? A 401k is NOT a retirement plan -- it is plain and simple GAMBLING! Anyone who tells you otherwise is a liar.
I am not betting my life savings in the stock market. I am betting portions of my life savings in companies. I am doing so because - unlike the casino - I believe those companies will be able to provide me with a return on my investment by providing goods and services to people at a profit.
You're right in that it's not risk-free. If I'm wrong - if I believe the wrong people (like the CEOs of Worldcom and Enron, or the analysts who claimed that the dot-coms were gonna continue to go through the roof) - I stand to lose.
I think you'd agree with me when I say it's not easy. If I can't trust what the analysts say (and I can't!), then I have to do my own research. That's non-trivial.
But how's that different from any other buying decision? Most of us spend hours reading about technology every day - so that when we wanna play UT2003 or Doom 3, we know what hardware to buy that'll give us the most bang for our buck? Several hours of work (sometimes hundreds of hours, if you're a regular reader of hardware sites, or even Slashdot) for a $500-1000 purchase of hardware.
If you're going to invest in individual stocks (or even indirectly, through mutual funds), why not spend some time learning some accounting basics? Why not spend as much time taking care with your life's savings as you would with a new video card? (Or, depending on how much you've saved -- as much time as you'd spend researching a new car, or even a move to a new house?)
A balance sheet or earnings statement is like the specs on the side of a flashy retail box of hardware - it's a start, but it's not everything you need to know to make an informed purchase.
Just as any geek can learn enough to determine the front-runner in the never-ending race between Duron/Athlon/TBird/TBred/Palomino/Clawhammer/Sledg ehammer vs Celeron/Celeron2/P3/P4/P4-Northwood/Itanic - any geek can learn enough to determine whether a company's worth investing in.
there are two responses to this.
I agree with you about not wanting to work with a bunch of slobs. I've been in that sort of environment and it's hard to take the Chief Scientist seriously when he's wearing shorts, a hawaiian shirt, and birkenstocks. However, you eventually can take him seriously, if you can get over your appearance prejudices.
Philosophically I'm appalled by the placement of being "environmentally correct", and thus making more money, over personal freedom. I know that I'm in the minority so I'll stop arguing. I bow down too after all.
"Before you point your finger you should know that I'm the man" - Tool
Actually, MS did this receantly. What they had been doing was underreporting earnings so as to be able to build up a reserve that they could then use later to prop up earnings when the market slowed down. It's not illegal, but still frowned on.
That's really odd, because if I underreport my earnings, I get in trouble for tax evasion.
I'm not trying to compare apples and oranges here; I'm really curious if MS reported the same numbers to SEC and IRS / Washington State Department of Revenue. If so then someone ought to get that money from them; Washington state needs every penny it can get right now.
Finding God in a Dog
ROTFLMAO,
Kid, for starters your drivel is an insult to people who lived in actual slavery. A Year under the lash in a cotten field or in a Siberian Gulag, and you might learn just how stupid your ideas are.
Secondly you might want to look up who first came up with the "Wage Slave" drivel you're spouting. A Fellow by the name of John C. Calhoun, a Slaveowner making the absurd claim that his Chattels were better off than free workers.
Quemadmodum gladius neminem occidit, occidentis telum est
Which is moronic. You should BE focused on your work, not trying to LOOK like you are. What you look like shouldn't matter at all, what you DO should.
Not like that's a revolutionary idea around here, though.
I suppose it depends on your perspective. I believe that the most honorable way to live is however one chooses to live. If I choose a lifestyle and am happy with my choice then nobody has any right to tell me I'm wrong.
However, if someone else chooses a lifestyle FOR me, then my true self - the person that *I* choose to be - is being suppressed.
Say that we're talking about something good for you like eating a certain vegetable. Would you rather choose to eat the vegetable because you read the facts and know what nutrients it supplies, or be told to eat it because, well, people in your social stratum are supposed to?
Yes, Virginia, there are different degrees of slavery. Doesn't mean that "thought and appearance" (in other words, free speech) slavery is good.
Steve
Steve Magruder, Metro Foodist
It starts with one, but everybody seems to have a different "one" that needs it. Pretty soon the killing is out of control and the people yearn for order again. Then in rides the man on the white horse to provide it. It's happened so many times now that the story's getting a bit old.
You can only drink 30 or 40 glasses of beer a day, no matter how rich you are.
-- Colonel Adolphus Busch
Any talk of this being a Clinton-caused recession is just willfully ignoring that the Bush's tax cut caused nearly half of the budget shortfall.
Why? Is there any proof that the tax cut is causing the recession? NO. This recession was mainly caused by stupid investors. People put FAR too much money in companies that had absolutely no way to sustain themselves. Secondary causes to the recession are undoubtaly the war on terror. The uncertainty caused by 9/11 has dragged down the stock market and killed consumer confidence. Finally, corporate fraud has helped keep the recession down. Most of the corporate fraud has been reporting revenue incorrectly so that companies would appear to be profitable. If they had reported their earning correctly, the companies would still be bankrupt, and the economy wouldn't be that much better (not to imply that it wouldn't be better at all).
Ask yourself if you're better off now or 4 years ago. Good, now vote Democrat in November.
What a dumb statement. You should ask yourself what would have been different if Al Gore had been president, and whether or not you would have been better off. It would be interesting to know what Mr. Gore would have done in response to 9/11 and to all of the accounting scandals. That is the better question to ask yourself. But even that is a stupid way to determine who you should vote for. You should evaluate the candidates, not whether or not they are Democratic, Republican, etc., but whether or not they will represent *your* interests in government. That is the entire point of a Republic.
Come play Heroes of Might and Magic Mini online.
(free speech) slavery?
Sounds like "freedom is slavery".
Now where have I heard that?
Quemadmodum gladius neminem occidit, occidentis telum est
Why?
Quemadmodum gladius neminem occidit, occidentis telum est
FWIW, I plan to vote Libertarian next election ;-)
IMO, the Libertarian party is the only party these days that cares about the freedom of the citizens.
Sticking feathers up your butt does not make you a chicken - Tyler Durden
yeah, see, if I'm facing customers and other businesses, I have no problem with dressing appropriately. I still don't own a suit, but I'd never wear jeans and a t-shirt to a sales meeting. That's just dumb.
But if I'm sitting in a cube all day writing code and I only talk to other people that are doing the same thing, and the customers are in different buildings/cities/countries/whatever, then my attire has nothing to do with my ability to do the job, unless I'm one of those people that works better when they look better.
I'm in a relaxed office, too. Most people at my office routinely wear jeans and a polo/oxford type shirt, and sneakers. They only tell us to dress better when there are major clients in the office for meetings.
Of course, massive theft from shareholders is all the fault of the government for investigating it. Why didn't I realise it before? And here I was, thinking it was the greed of rich wankers stealing from their employers!
rebellion is just conforming to the minority. there is no such thing as unique behavior.
So do you oppose the death penalty unilaterally, or do you like it when it's poor black folks and only dislike it when it's the wealthy aristocracy?
Clarification: Allowing one's appearance or thoughts to be effectively controlled by another entity, without a good rationale or good return on one's choice to conform (Business dress being a great example) is tantamount to being a slave. It's certainly nothing like the work-slavery of old and new, but it's slavery nonetheless.
Steve Magruder, Metro Foodist
This may not be the definitive answer to the question, "Why Andersen, but not KPMG/PWC/E&Y/C&L?", that you raise in point #3, but to me, it's a darn good one:
All auditing companies have an internal review panel for reviewing auditing practices when questions arise, right? But when a client wanted to stretch the rules, that could be a problem. Andersen decided to make a significant marketing element out of the fact that at Andersen, the local engagement partner (e.g. David Duncan, in the case of Enron) would have final say as to the auditing standards used. No need for things to get held up by some board at headquarters or worse, overruled.
Needless to say, this was a system whose architecture would inevitably corrupt the local engagement partners. David Duncan did some stupid and perhaps criminal things, but the real misdeed was done by whoever decided to adopt the policy of auditing standards being settled by the local engagement partner. Greedy dumb bastards.
I took the time to go back and look up where I read about this so you wouldn't have to take my word for it. You can find it discussed in this interesting Business Week Online article. Worth reading.
--LP
When you wish to go on another person's properity you either conform to thier rules of conduct, or you refrain from entering thier properity. If you don't like it, don't go there. Go somewhere that has standards of conduct that meet you taste instead of acting like a boor and hurling insults.
If one of my employees accused me of being a Slaver for setting standards of conduct on my properity , I'd glady "emancipate" his ass. I Want workers, not spoiled children who cry if they can't have thier way.
Quemadmodum gladius neminem occidit, occidentis telum est
It's too bad you ignored the clause "without a good rationale". Requiring business suits has no rationale that serves the purpose of an enterprise in ensuring that employees keep focus. If you can't understand this point, then you're just being argumentative.
Steve Magruder, Metro Foodist
Business suits say "we are serious" when a prospective client is visting to elvaluate a company. Just because you fail to understand the rationale dosen't mean there isn't one. It's a matter of setting a good impression.
Quemadmodum gladius neminem occidit, occidentis telum est
A couple of big companies went bust in Australia recently after carrying out some extemely dodgy practices - Andersen audited both of them and has been caught in the fallout. It looks like the best career choice over here at the moment is "secretary" to a company director - big salary (bigger than a CIO), big travel account, accomodation in the best hotels five days a week - and possibly a big lingere allowance as a valid work expense!
Quemadmodum gladius neminem occidit, occidentis telum est
For a musical take on the whole idea, try listening to Won't Get Fooled Again.
You can only drink 30 or 40 glasses of beer a day, no matter how rich you are.
-- Colonel Adolphus Busch
Thankfully, like you suggested, I can choose to not work for a company that values puffery over performance, like yours.
Steve Magruder, Metro Foodist