'World-Con': Massive Accounting Fraud Hits Wall Street Again
	found on: CBS Marketwatch written by PerryStroika, edited by Humberto (Plastic) [ read unedited ] posted Tue 25 Jun 6:15pm
		"As if Enron wasn't testament enough to the total venality and duplicity of the accounting industry, the gargantuan telecommunications firm WorldCom announced on Tuesday that it is restating its financial statements for 2001 and first quarter 2002 because of incorrect capital expenditure accounting," writes PerryStroika. "The restatement reduces the EBITDA (Earnings Before Income Tax and Depreciation) for 2001 to $6.339 billion and the EBITDA for first quarter 2002 to $1.368 billion. The correction amounts to about 3.8 billion dollars. An apparent profit for those periods will now turn into a loss. In the near term, the firm faces bankruptcy. My guess is that the significance of this will not be missed by investors, who are all too familiar with being lied to. Tomorrow morning, the already beaten down Dow and Composite are in for a pounding. And why shouldn't they be? What's the point of owning stock when the information the companies are giving you just might be total crap? You'd probably be better off stuffing twenties into your mattress."

[ more plastic... ]    

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1.  Easy come, easy go.   by MAYORBOB       at Tue 25 Jun 6:48pm score of 1     This is becoming the main story of how to run a business in 21st century. But, you might want to hold onto those Worldcom shares, because if this happens, Worldcom may yet end up looking like a good investment. Tending to final details.   [ ...reply just to this | comment on the story... | next new ]

43.  Re: Easy come, easy go.   by hoodeenee       at Wed 26 Jun 8:38am score of 1   in reply to comment 1     It's not a new phenomenon, is it? It's not the 21st century or the 20th, but all of them. The princes with control always abuse it, and when the Enron story broke I predicted that there were hundreds of others to come. This is really an outgrowth of the banking scandals of the 80s and 90s, and it points to a general dishonesty inherent in high stakes business. Consumers experience this all the time at our end (crap products and service), but only when the shit is really hitting the fan and the fraud inflates to numbers no one can hide that we ever hear about the real bad stuff going on at the top. Have you seen this story yet? Adelphia reported to the SEC in late May that it appeared the company had guaranteed $3.1 billion in loans to the Rigas family, much of it used to buy now-devalued Adelphia stock. The company said even those figures may change because the Rigases refused to review or provide information for the filings. I hear the fan humming, do you smell that? karma is for sissies   [ ...reply just to this | comment on the story... | next new ]

2.  Enough is enough.   by jbou       at Tue 25 Jun 7:19pm score of 3 clever     We have become a nation of gamblers and jugglers, we spend our lives performing tricks with paper. The jig is up corporate America, get your shit together, start producing an actual product, or service that is profitable, and stop moving paper around to create the illusion of profit. You have no one to blame but yourselves, and the funny thing is you have the nerve to take our tax money, and make us feel grateful to you because you give us a way to support ourselves. Well corporate America it's time to clean up your backyard it's a god damm mess, and hopefully our government actually steps up to the plate, and tells you no more corporate welfare till you start producing. Love you, or hate you corporate America we're stuck with you, yes you've done this before, and you have come back, but you are hurting too many people with your irresponsible behavior, get your shit together, or .... sad but true there is nothing we can do, so fuck you. All the liberals leave the room please. All right, now that I got that altruistic bullshit out of the way, yo coporate America yo, drop me a line and tell me when the fix is in, so I could get my money in when it's good, and get it out before it gets ugly, yo this liberal has got to eat too, and I'm sick of chopped liver, I need some fillet mignon.       Peace, Jbou Arguments have no chance against petrified training; they wear it as little as the waves wear a cliff.   [ ...reply just to this | comment on the story... | next new ]

5.  Re: Enough is enough.   by bitekman       at Tue 25 Jun 8:03pm score of 2 astute   in reply to comment 2     with the way the markets are tanking, I'm not even sure uncle sam'll have to step in. Hordes of angry stockholders will batter down the revolving doors and hurl the herman-miller chairs at the corpulent CEO's pushing their Weimer-republic-esq wheelbarrows of stock options. Anyway, uncle will be too busy explaining to t-bond holders why they weren't, actually, such a great investment. I'm full of bees...who died at sea -- Sparklehorse   [ ...reply just to this | comment on the story... | next new ]   14.  Re: Enough is enough.   by miles       at Tue 25 Jun 10:20pm score of 1.5 intriguing   in reply to comment 5     When will we see the first "market rage" murder of a thieving ex-CEO? this is an experiment designed to elicit an emotional response   [ ...reply just to this | comment on the story... | next new ]   98.  Re: Enough is enough.   by astrogirl       at Thu 27 Jun 2:57pm score of 1   in reply to comment 5     "with the way the markets are tanking, I'm not even sure uncle sam'll have to step in" The market closed up on Wednesday and rallied today. The predictions of crashes are again premature or misplaced. I'm not sure anyone really gives a shit. What's $4 billion in the scope of our economy? And if I am elected I promise the formation of a new party, a third party, the Wild Party!   [ ...reply just to this | comment on the story... | next new ]   23.  Re: Enough is enough.   by chatsubo       at Wed 26 Jun 6:55am score of 2 clever   in reply to comment 14     I think you are forgetting Robert Maxwell Every man is guilty of all the good he did not do   [ ...reply just to this | comment on the story... | next new ]   9.  Jbou, I'm doing the best I can.   by Corporate America       at Tue 25 Jun 8:39pm score of 1 funny   in reply to comment 2     I'm cleaning things up, heads will roll, I'm reorganizing, I'll get right on that, and any other catch phrase my high paid consultant is whispering in my ear. As for the tips dog, yo I'll message those to you, and keep the shit I send you on the down low.       Later, C.A I own you all.   [ ...reply just to this | comment on the story... | next new ]   10.  Re: Jbou, I'm doing the best I can.   by Anonymous Idiot       at Tue 25 Jun 8:57pm score of 1 intriguing   in reply to comment 9     Why do I suspect that Corporate_America is jbou using a fake username?   [ ...reply just to this | comment on the story... | next new ]   31.  Re: Enough is enough.   by tdahnsn       at Wed 26 Jun 8:00am score of 1   in reply to comment 2     Just a few points of facts from those of us who aren't looking for someone else to send them the line when the fix is in. 1) Most companies are responsible and do report honest earnings. Their stocks suffered terribly while WorldCom and Enron were lying because they told the truth. They do have products and services and are completely at the mercy of bigger names with less real value. 2) Most companies just want the government to enforce existing laws to clean up companies or to remove some laws. The laws which cut down on the hostile takeovers of the 1980's are most directly responsible for the incredible bloat in CEO salaries, fraud, and the current mess in the backyards of lots of companies. If you want a better America start with better information. Thanks, TDAHNSN Why? What's the most callous thing you've said today?   [ ...reply just to this | comment on the story... | next new ]   41.  Re: Enough is enough.   by Zal42       at Wed 26 Jun 8:32am score of 1 interesting   in reply to comment 31     I wish I were so optimistic. I do agree with you if we exclude multinational corporations from consideration. But, I suspect that amongst the multinationals, the Enrons and Worldcoms are the rule, not the exception. They don't report honest earnings, they do regularly cook their books, and they do hate you (but love your money). And they have most important gov'ts well paid off, so there's no one really keeping an eye on them. A good start to fixing some of this would be to legally recognize multinational corps as nations (since, let's face it, that's what they are), strip them of all special business standing within the US, and start forming treaties. No Other Possibility   [ ...reply just to this | comment on the story... | next new ]   40.  Re: Enough is enough.   by Zal42       at Wed 26 Jun 8:26am score of 1   in reply to comment 2     We have become a nation of gamblers and jugglers, we spend our lives performing tricks with paper. If by "gamblers and jugglers" you mean "thieves", then I'm right with you. Our system, both corporate and gov't (pretty much the same thing, now) is hopelessly corrupt. An honest person doesn't stand a chance. Oh, and the fix is in already, jbou! You've already missed the boat! You and I play a little different game than the Big Boys: we play "Cover Your Ass and Hope For The Best". No Other Possibility   [ ...reply just to this | comment on the story... | next new ]

3.  Straight from the archives - so eerily familiar   by wetkarma       at Tue 25 Jun 7:22pm score of 1 modappeal     The Stock Market Crash 1929 By Michael Boldin This article courtesy of The Dismal Scientist produced by Economy.com, Inc. October 24, 1929. Black Thursday. On this infamous day, the New York Stock Exchange was hit with chaos that quickly amounted to a 30% decline in the value of the Dow Jones Industrial Average. This loss marked the end of the Roaring Twenties, when many believed that the only direction for the stock market and the entire economy was up. Soon the U.S. entered into its longest and deepest economic slump, the Great Depression, and it took 25 years for the Dow to return to its previous high. While few believe that the crash on Wall Street in 1929 was the root cause of the Depression, it was an important factor in putting the economy on a road of instability and setting the stage for other problems and mistakes that produced a large black mark on this country's economic and cultural history. Few have personal memories of the 1929 crash, but the event still colors the play of cautious investors. In a matter of hours, thousands saw their fortunes sink, turning previous paper millionaires into destitute paupers. Popular legends report numerous suicides, and there were a few highly visible and documented cases on October 24 and the weeks that followed. When the carnage ended and the market reached its low point in mid-1932, the Dow, a stock index built upon the highest quality corporations in the world, was down almost 90% in value. To fully appreciate the impact of the crash, it is important to also look at the bull market of the 1920s and how Wall Street operated at the time. In the 1920s, many of the Dow stocks rose more than five-fold in value, enticing those with little knowledge of the financial aspects and risks of stock trading to try make a quick fortune on Wall Street. One notorious example of the exuberance was an article in the August 1929 issue of Ladies' Home Journal titled "Everybody Ought to be Rich" that claimed America was entering a golden age where returns of over 20% per year on stocks would be common. Numerous individuals of modest means took interest and bought stock on margin in the late 1920s, putting up as little as 10% of the cash price, borrowing the remainder from a brokerage firm. As long as the market rose, everything was fine. But whenever the market showed a significant downward blip, margin calls were triggered that forced those that had highly leveraged their stock purchase to sell at a loss. These forced sales caused many to unexpectedly lose all of their savings. The stock market saw several large swings in late 1928 and early 1929 that should have warned investors of the inherent risks in stocks, but few took heed. It is estimated that the drop in stocks in late 1929 was worth $30 billion, which was about 30% of GDP at the time. Clearly, this had a large negative impact on the economy and contributed to the banking panic and Great Depression that followed. There were a few useful outcomes, however. Before the crash, security regulations were either lacking or rarely enforced, and stock brokers regularly hyped dubious firms. In 1934, after Congressional hearings on the problems, the Securities and Exchange Commission (SEC) was established to police Wall Street behavior and protect investors from fraud. Page 2 National Council on Economic Education Page 2 of 2 Also, after 1929 many more economists and financial experts became interested in studying techniques for properly valuing stocks and giving advice on how to avoid financial panics. Their research has added to our knowledge about the economy and is at least partially responsible for the greater stability in many markets. A long-lasting negative effect of the 1929 crash was that many were turned off permanently toward stock investing. Few seem to know, however, that a purchase of diversified stocks even at their peak in 1929 would show a very healthy return (if held to today), especially compared to supposedly less risky bonds and bank CDs that historically have trouble keeping pace with inflation. Nonetheless, despite the high, long-run positive returns that stocks can show, many ask whether another crash could happen? In one sense, it already has. On "Black Monday," October 19, 1987, the Dow lost 23% in value. The difference between this case and 1929, however, was that the market soon stabilized and a year later it was hitting new highs. Black Monday of 1987 had little lasting impact on the economy, save for the adoption of additional rules for how Wall Street operates during a sudden decline. Still, some see stock prices as overvalued in 1999; broad stock indexes such as the S&P 500 show price-earning ratios of almost 35 compared to the historical average of 15. Therefore, a decline of 30% or more to move closer to historical fundamentals is conceivable, especially if some of the high-flying Internet stocks are hit with unexpect read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

4.  Re: Straight from the archives - so eerily   by WastingMy       at Tue 25 Jun 7:34pm score of 2 informative   in reply to comment 3     While the 1929 stock market crash clearly set events into motion, the proximate cause of the depression was bank failure.   [ ...reply just to this | comment on the story... | next new ]   6.  knee-jerk, straight from the archives   by tylerh       at Tue 25 Jun 8:12pm score of 1 astute   in reply to comment 3     I love these posts. Every stock market downturn, out they come. yawn. As another poster pointed out, their were lot of differences to. S/he pointed to massive bank failure. Another difference was widespread protectionism -- recall the Smoot-Hawley tarriffs. And lastly, the Central Bank raised interest rates after the crash to "punish" Wall Street. Can you, in a million years, imagine Al Greenspan doing this? Courage   [ ...reply just to this | comment on the story... | next new ]   27.  Re: knee-jerk, straight from the archives   by wetkarma       at Wed 26 Jun 7:14am score of 1.5 disingenuous   in reply to comment 6     Well you certainly have convinced me. Since the situation is not 100% the same, we can safely ignore the parallels of fraud in accounting practices discovered after a boom between the 1920s and now. We can even ignore the idea that the government is incapable of using interest rates as an economic spur if the basic trust in investing is shattered as it was in the 1920s. But don't mind me...I'm just an incoherent shill for karma points. Ceterum censeo socialsecuritatem esse delendam.   [ ...reply just to this | comment on the story... | next new ]   29.  Re: knee-jerk, straight from the archives   by Estimator       at Wed 26 Jun 7:51am score of 1.5 astute   in reply to comment 6     Did you say something about widespread protectionism and there not being a parallel? This is precisely one of the reasons posters like this should keep on posting. Already, there have been steel and lumber tariffs, and I am sure it would be very tempting for the US to extend these tariffs. You are right not to worry too greatly, but I wouldn't get complacent either.   [ ...reply just to this | comment on the story... | next new ]   8.  hey   by Corporate America       at Tue 25 Jun 8:34pm score of 1.5 funny   in reply to comment 3     stop reminding everyone of my past problems. Everything is fine, move on, nothing to see here. I own you all.   [ ...reply just to this | comment on the story... | next new ]   66.  Alarmism - so eerily familiar.   by tylerh       at Wed 26 Jun 10:37am score of 1.5 informative   in reply to comment 3     Every stock market downturn these Jeremaids arise. If you don't believe me, checkout chapter 3, "apocalyptic fiction", in Adam Smith's Supermoney. Published in... 1981. Or read some Martin Mayer (if you can stand the self-righteousness). Do you remember 1987 and it's aftermath, when these kinds of claims were all over the place and Michael Millikan, Ivan Boesky, and the investment banks who were the crooks in the popular melodrama? I know scaring oneself is endlessly entertaining, but couldn't we at least find a new way to scare ourselves,like say the panic of 1906? Or the recession 1893? Or, if you really now your stock market history, the collapse of the "nifty fifty" market? I don't mean to be pollyannish, but this particular trotting out of the "parallel" has gotten really, really tiring. Beware the poster with too much karma... Courage   [ ...reply just to this | comment on the story... | next new ]

7.  The End Is Near   by astrogirl       at Tue 25 Jun 8:28pm score of 2 clever     WorldCom has fired its CFO, Scott Sullivan, and a controller and senior VP, David Myers, has resigned amid allegations of what the Wall Street Journal says "could be one of the largest accounting frauds in history." Will this be the tipping point? Already, the dollar is slipping and the congress will likely cause a government shutdown due to a lack of appropriations. All the news is not all bad, however. Per the WSJ regarding generally bad June statistics "The housing market remained strong." We can delight in the fact that housing remains overpriced. And if I am elected I promise the formation of a new party, a third party, the Wild Party!   [ ...reply just to this | comment on the story... | next new ]

11.  Something else I forgot to mention...   by PerryStroika       at Tue 25 Jun 9:07pm score of 4 astute     Guess who WorldCom's auditors were for the year 2001? I'll give you a hint. It begins with an "A" and ends with an "n". Coincidence? I'm sure their motives are pure. Wait...Stop laughing... Mouthpiece   [ ...reply just to this | comment on the story... | next new ]

21.  Guess who the watchdogs were   by Miguel Agullo       at Wed 26 Jun 5:49am score of 1 clever   in reply to comment 11     Enron & friends ... or Bush's Commodity Futures Trading Commission. But, hey, remember: these are all isolated incidents with no relation with each other. No need to legislate.   [ ...reply just to this | comment on the story... | next new ]   25.  Re: Something else I forgot to mention...   by chatsubo       at Wed 26 Jun 7:02am score of 0.5 irrelevant   in reply to comment 11     anyday now and we'll find out the Andersens were awarded the contract to double check the Florida budget. Every man is guilty of all the good he did not do   [ ...reply just to this | comment on the story... | next new ]   33.  Re: Something else I forgot to mention...   by rukahiway       at Wed 26 Jun 8:12am score of 1.5 informative   in reply to comment 25     no... they also did the election ballot audit. i'm not sure which is worse: A.Anderson single-handedly bringing $800 billion in market capitalization to its knees, or helping to elect the poor man's Dan Quayle. i walked a thousand miles to bring you wine   [ ...reply just to this | comment on the story... | next new ]   59.  Re: Something else I forgot to mention...   by cichlisuite       at Wed 26 Jun 9:59am score of 1.5 clever   in reply to comment 33     or helping to elect the poor man's Dan Quayle No, that would be Gore. Bush is the rich man's Dan Quayle.   [ ...reply just to this | comment on the story... | next new ]   68.  Anderson the Auditor? Could have been much worse   by Philosawyer       at Wed 26 Jun 10:49am score of 1   in reply to comment 11     It would have been even bigger news if it was a major accounting firm other than Anderson. The effect on Anderson is roughly equivalent to shooting a guy already falling toward certain death. The marketing division of the Sirius Cybernetics Corporation defines a robot as "Your plastic pal who's fun to be with."   [ ...reply just to this | comment on the story... | next new ]

12.  Pollyanna? Meet Chicken Little   by arnaut       at Tue 25 Jun 9:31pm score of 2.5 intriguing     That basically describes my attitude about this whole affair. As with the looming debt default, I keep saying, "They can't be that stupid": how could WorldCom fuck up on something as fundamental to good business as keeping clean books? To paraphrase Alan Rickman (as Hans Gruber) in Die Hard, when you steal* $7.70, no one tends to notice; when you steal $7.7 billion, they will find you--unless they think you're already dead. I guess the guys at WorldCom forgot about that last part.   But is this the start of a trend? Are we indeed seeing a second Great Depression unfold before us, as suggested earlier? I doubt it. There are many more safeguards now (debt default notwithstanding) to prevent a total collapse like that of 1929. Plus, the damage by these fraudulent companies seems fairly limited; it's not as if people across the country had invested their whole savings into these companies, as in 1929.   Then again, the sky could fall in an entirely new way this time, which may not be so bad--I hear migrant workers get to travel a lot :) * For the record, I am not equating bad accountants with terrorists, or bank robbers disguised as terrorists; I am merely illustrating the impossibility of hiding vast sums of money. Poi s'ascose nel foco che gli affina.   [ ...reply just to this | comment on the story... | next new ]

13.  Accounting problems are serious business.   by PerryStroika       at Tue 25 Jun 9:48pm score of 2 compelling   in reply to comment 12     "But is this the start of a trend?" In accounting fraud? Yes. This is the latest in a long line of scandals. Lucent is one example. Xerox is another. Of course, Enron. And read the entire comment...   [ ...reply just to this | comment on the story... | next new ]   67.  Re: Accounting problems are serious business.   by KateGodwin       at Wed 26 Jun 10:47am score of 1   in reply to comment 13     Frontline (my TV newsmagazine of choice) had an entire episode on just how large the issue is, and how the crime trail quickly leads back to Washington. Color me not surprised...   [ ...reply just to this | comment on the story... | next new ]   15.  Re: Pollyanna? Meet Chicken Little   by miles       at Tue 25 Jun 10:26pm score of 2 succinct   in reply to comment 12     Plus, the damage by these fraudulent companies seems fairly limited; it's not as if people across the country had invested their whole savings into these companies you meant to have "sarcasm" tags around that, right? this is an experiment designed to elicit an emotional response   [ ...reply just to this | comment on the story... | next new ]   19.  +1, Alan Rickman reference   by Brian Jones       at Wed 26 Jun 1:28am score of 1.5 funny   in reply to comment 12     I'm (mod)pointless at the moment, so you'll have to settle for this kudo. Cheap crass attention-whoring plug goes here.   [ ...reply just to this | comment on the story... | next new ]   51.  Re: +1, Alan Rickman reference   by nickdrake       at Wed 26 Jun 9:26am score of 1   in reply to comment 19     "I am an EXCEPTIONAL thief!"   [ ...reply just to this | comment on the story... | next new ]   28.  Five Millions Ways to Kill a CEO   by jimray       at Wed 26 Jun 7:44am score of 1 astute   in reply to comment 12     * For the record, I am not equating bad accountants with terrorists, or bank robbers disguised as terrorists; I am merely illustrating the impossibility of hiding vast sums of money. Why not? I can understand not wanting to jump on the bandwagon of calling everything bad terrorism, but I would argue that the atrocities of Big Business that we've seen over the past six months are at least as bad, if not worse, than acts of terrorism. The damage done by these thieving mongrels, the CEO's, CFO's, VP's, politicians, and accountants, affects thousands, if not millions of hard working Americans. Is wiping out the life savings of thousands of employees that much different than killing thousands of Americans with a commercial jet? The posturing by officials at WorldCom, et al, needs to end ("We're shocked-SHOCKED-I tell you"). Corporate America needs to be held responsible and accountable for these actions. Those responsible need to be put in jail, the millions (billions?) they've siphoned off need to go to the workers who broke their backs for these frauds. I'm afraid it's going to take a disgruntled, now broke, former employee offing some CEO before the right level of attention is brought to this. Until then, until the level reaches revolutionary boiling point, I can't imagine our "government" bringing much reform. "You're not thinking, you're just being logical" Bohr to Einstein during a debate on quantum mechanics   [ ...reply just to this | comment on the story... | next new ]   36.  Re: Five Millions Ways to Kill a CEO   by rombuu       at Wed 26 Jun 8:20am score of 2.5 astute   in reply to comment 28     Is wiping out the life savings of thousands of employees that much different than killing thousands of Americans with a commercial jet? Um, yes... you aren't dead, for one thing... http://drlunch.com The site that helps you decide where to go to lunch!   [ ...reply just to this | comment on the story... | next new ]   45.  It's the numbers.   by Miguel Agullo       at Wed 26 Jun 8:49am score of 1   in reply to comment 36     Murder is worse than fraud, no doubt. However, when large numbers of the population are affected by the greed of a handful of thieves, their well-being begins to matter. At least to the guy who wants to get elected next, if you know what I mean.   [ ...reply just to this | comment on the story... | next new ]   61.  Responsibility and Guilt   by PerryStroika       at Wed 26 Jun 10:00am score of 2 compelling   in reply to comment 45     "However, when large numbers of the population are affected by the greed of a handful of thieves, their well-being begins to matter." It's worse than that for me. The magnitude of a crime should be tied to the amount of responsibility that the guilty party was vested with. A police officer is vested with authority by the government. He has been entrusted with the huge responsibility of enforcing the law. Thus, when a police officer violates the law it is ten times worse than for any other person committing the same crime, because it is also a betrayal of that trust. Similarly, WCOM management was entrusted with an enormous responsibility. Millions of people owned that stock. Millions of people entrusted their money into the care of these people. The size of the responsibility makes the enormity of the betrayl that much more nauseating. And in a way, it is that much more serious than terrorism. Terrorists are enemies and should be treated as enemies. They kill people, sure, but how else do you expect your enemies to act? In a way, corporate accounting fraud is actually worse. It wrecks the livelihoods of millions of people and creates unwanted chaos and suspicion. More than anything else, it destroys trust. I guess the question can be boiled down to this. Is it worse to be shot at by a mortal enemy in war or to be cheated and used by someone you thought was a close friend? Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   60.  Alan Rickman was wrong   by logan       at Wed 26 Jun 9:59am score of 2 witty   in reply to comment 12     When you steal $7.70, they lock you up for 5-10 (life, if it's your third offense). When you steal $7.7 billion, you sock it away to the Caymans, pay a $100,000 fine, lie low for a few years, and hit the lecture circuit at $200,000 a pop. "Spockmate!"   [ ...reply just to this | comment on the story... | next new ]

16.  Are you scared?   by jbou       at Tue 25 Jun 10:53pm score of 2.5 intriguing     If you aren't, check this out according to people inside the accounting biz there are many more companies pulling this type of con. Arguments have no chance against petrified training; they wear it as little as the waves wear a cliff.   [ ...reply just to this | comment on the story... | next new ]

17.  the most bizarre balance sheet ever   by miles       at Tue 25 Jun 10:59pm score of 4.5 astute     Alright, i don't know how many investor types we have here, but WCOM's balance sheet, ratios, etc. are "must see" shit. Balance Sheet Company Profile Okay, first things first: The writeup is just plain wrong. What the article says is "Without these transfers, the company's reported EBITDA would be reduced to $6.339 billion for 2001 and $1.368 billion for first quarter 2002, and the company would have reported a net loss for 2001 and for the first quarter of 2002". Got that? Those numbers are what the company actually made, not the amount the restatement is "wiping out". The amount being wiped out is actually $3.8 billion. Now, WCOM was trading at 5% of book value before this news came out today, and the stock shed 75% in extended hours trading. A large reason for that is the $50 billion of "goodwill" they h read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

22.  Re: the most bizarre balance sheet ever   by PerryStroika       at Wed 26 Jun 6:41am score of 1.5 informative   in reply to comment 17     "Got that? Those numbers are what the company actually made, not the amount the restatement is 'wiping out'." That's the company's EBITDA figures, which doesn't include interest expense or noncash charges. "That should be taking into account all the massive debt, everything. And you know what the market capitalization of WCOM will be, at the $0.20 per share it was trading at after this news? $0.7 billion. One fifth of what it's supposedly worth, even after this restatement." The value of the tangible assets might not be what they paid for them, considering the massive price deflation that long distance and internet backbone have had to deal with. Also, when you consider that a downgrade in WCOM's debt rating is going to add billions in interest expense. This also makes getting credit in the short term (something that would normally be a given for a company of this size) that much more serious. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   58.  Re: the most bizarre balance sheet ever   by Adipic Acid       at Wed 26 Jun 9:57am score of 1   in reply to comment 22     Add into this that telecom is incredibly capital intensive and pretty much requires strong lines of credit to function, and what we have here is a world-class fuck. I would bet that WCOM is trading as VRZN within 6-8 months. Joy. No folly is more costly than the folly of intolerant idealism. - Churchill   [ ...reply just to this | comment on the story... | next new ]   38.  Re: the most bizarre balance sheet ever   by astrogirl       at Wed 26 Jun 8:25am score of 1.5 intriguing   in reply to comment 17     I think it's even worse, actually. Consider that they booked these operational-type expenses as capital expenditures. This means there is $4 billion of supposedly hard assets that *don't exist* and are being actively depreciated. In addition, I'd be willing to bet that their receivables are overstated as well. Remember, back in February the WSJ said they "suspended three employees and froze the commissions of at least 12 salespeople as part of a broad investigation of an order-booking scandal that boosted sales commissions." The whole thing may be a house of cards, when it comes down to it. Fraud on the expense side of the balance sheet is likely supported by fraud on the sales side of the sheet. And, of course, those $4 billion in non-existent captial assets are $4 billion less for the corpse-pickers. In the long run, other Telcos will benefit from a WCOM bankruptcy, but in the short term, they are all going to be scratching their heads. Some of the larger Telcos persisted in developing data transport products because WCOM was making so much money at it. They are going to have problems operating minus 20,000 employees. They are going to have problems conserving/obtaining cash to maintain their operations. Eventually, they will declare bankruptcy because they cannot possibly support their debts. Are we headed for a major economic crash? I don't think so -- I think the bottom is quite close now. I do think some folks are going to need to go to jail before people trust the markets again. And if I am elected I promise the formation of a new party, a third party, the Wild Party!   [ ...reply just to this | comment on the story... | next new ]

18.  the end of business friendly?   by liminal999       at Wed 26 Jun 1:11am score of 2.5 astute     I wonder how long congress and the Bush "administration" can keep up the business friendly dogma with such blatant, and apparently rampant, corporate malefescence going on... On that same note, how business friendly is business friendly anyway? By letting accounting companies get everything they want in legislation last decade--by allowing them to consult companies that they audit--congress helped set the stage for the accounting clusterfucks such as these. It was done in the name of being conducive to business. But look at the havoc that's resulted on the stock market...it's at its lowest levels since the September attacks. Investors have really lost faith in the stock market, sort of the opposite of the rising tide analogy. It kind of exposes the fallacy that regulation is categorically bad for business. If investors trust that there are fair watchdogs and that companies are prevented by law from engaging in conflicts of interest, people are more willing to put their cash in the marketplace...and you need strong regulatory systems in place for that to happen. ugly design for beautiful people   [ ...reply just to this | comment on the story... | next new ]

79.  Re: the end of business friendly?   by monobrau!       at Wed 26 Jun 1:18pm score of 1   in reply to comment 18     You mean the way that the S & L crisis and the junk bond scandal of the 80's ushered in a new era of accountability and ethics? One can only hope.   [ ...reply just to this | comment on the story... | next new ]

20.  Business friendly has only just begun   by jdfan       at Wed 26 Jun 5:26am score of 1     At least, the modern term for it... in the past, the Great Communicator (Reagan for those too young to remember) called it deregulation. And also proceeded to do exactly what all these companies are doing: ripping off the shareholders. Bush will call for more deregulation (I predict) And this song will fade out.   [ ...reply just to this | comment on the story... | next new ]

24.  So why is it   by chatsubo       at Wed 26 Jun 6:59am score of 5 astute     when a crackhead steals 20 dollars he gets three years but when a CEO steals billions, he walks away. I never knew, until recently, that trickledown economics was referring to the trickles of piss the rich and untouchable spray on all the rest of us. Every man is guilty of all the good he did not do   [ ...reply just to this | comment on the story... | next new ]

62.  Re: So why is it? Very Simple.   by nurvgas       at Wed 26 Jun 10:08am score of 1   in reply to comment 24     $20 does not share out nearly as well as a few billion. I am also unsure as to who the crackheads lobbyists are....not the case with Mr. Billionaire "The wool from the black sheep is just as warm" - The Sound of Music   [ ...reply just to this | comment on the story... | next new ]

26.  The Road to Bankruptcy   by PerryStroika       at Wed 26 Jun 7:11am score of 1     Mileshuman has brought up the balance sheet, and indeed, once you observe the assets and equity of the company it is easy to wonder how it is they could go bankrupt. As sizeable as its debt is its tangible assets are greater, and they do have around 7 billion in cash. But the future of the company is in doubt, and here is why. Already people are smelling blood. They're sensing weakness. In the short term there will be a cash crunch as creditors start demanding payment earlier or immediately. In that situation, what you need more than anything is cash to meet short term expenses, which means you probably have to borrow. But the public perception of weakness makes credit that much harder to get, and when you can get it's way more expensive because the interest goes up with the perceived risk. In other words, the perception of weakness, that the future of a company is in doubt, helps to create the reality. And meanwhile, the company is not making money. That just compounds the problem. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]

32.  Second-hand experience   by DeaconDoWrong       at Wed 26 Jun 8:12am score of 3 informative     A buddy of mine quit worldcom like a month ago, and to hear him tell it it was pretty pathetic during its last days. There had been waves of layoffs, and they started this whole laughable 'money saving' initiative. Sales meetings that used to be $20,000 affairs with astronaut speakers became dingy meetings at the office. They canceled the christmas party. Everyone got memos announcing things like, that they would have to bring mostly there own office supplies as they would no longer be re-stocked. They stopped buying coffee, and they told people to turn off their computers while they were at lunch! Meanwhile the CEO at the time owed the company millions that he had taken in personal loans. All the while rumors and news reports trickled in that culminated in today's story.   [ ...reply just to this | comment on the story... | next new ]

71.  Re: Second-hand experience   by emars       at Wed 26 Jun 11:26am score of 1   in reply to comment 32     I'm at WorldCom right now, baby -- and let me tell you... it's business as usual (sans coffee). However, with 17,000 layoffs coming this week (they haven't started yet)... I'm not sure I'll be around much longer. I just started a few months ago after being laid-off at a dot-com. Ho hum... ...18...19...20... submit!   [ ...reply just to this | comment on the story... | next new ]   75.  Re: Second-hand experience   by DeaconDoWrong       at Wed 26 Jun 12:58pm score of 1   in reply to comment 71     well fuck it, who wants to work without coffee anyway?   [ ...reply just to this | comment on the story... | next new ]

34.  Vote your shareholder proxies for new auditors   by call -151       at Wed 26 Jun 8:12am score of 2.5 novel     One thing that people can at least begin to do as shareholders is to vote against board recommendations for auditors. I've been doing this for years (OK, so it hasn't had much effect yet) but the point is that almost every BOD recommendation is for the same auditors that were used the previous year. Using the same ones encourages overly-friendly review and, in general, there is a fundamental conflict of interest. Sharesholders should always vote for an auditing firm that will act in their best interests; often, the board of directors' interests do not coincide with shareholders. Shareholders, in general, are pretty lethargic. There are some very noteworthy exceptions- Warren Buffet can throw weight around for real change, and some retirement funds (most notably the California Public Employees Retirement Fund CALPERS but in general, people don't feel like they can make a difference or have a voice. So look what happens (Enron, etc...) Shareholder oversight is an obligation of stock ownership and too many people just want to purchase shares, reap benefits and forget their obligations.   [ ...reply just to this | comment on the story... | next new ]

42.  Re: Vote your shareholder proxies for new   by Estimator       at Wed 26 Jun 8:38am score of 1   in reply to comment 34     The problem with your proposal is that most shares are actually owned by institutions, and not directly by people. In order to influence a vote, most people would be better off trying to pressure Vanguard (or whichever company runs their mutual funds) to vote one way or another. Shareholder activism does work, but only on limited occasions when the publicity pressure pays off.   [ ...reply just to this | comment on the story... | next new ]   47.  Re: Vote your shareholder proxies for new   by call -151       at Wed 26 Jun 9:04am score of 1.5 astute   in reply to comment 42     Hey, you have to start somewhere! Mutual funds should have considerable influence as large stakeholders in companies, but few have wielded that power for the good of shareholders. More pressure on mutual funds to act in the best interests of their owners is a good place to start. Some mutual funds are more "hands on" than others when it comes to recommending and rewarding change. Again, the fundamental problem is that the decisions are made by people whose interests do not coincide- a few dollars wining and dining a mutual fund manager (oh, sorry, in a "investor relations meeting") may blind them to their true obligations, to those who own the shares in the mutual fund. Many mutual funds managers interests again do not coincide with sustained, risk-minimized growth. I avoid traditional mutual funds in general, particularly those with significant expenses, precisely because of some of the conflict of interest issues that can arise.   [ ...reply just to this | comment on the story... | next new ]   86.  Re: Vote your shareholder proxies for new   by GodSpiral       at Wed 26 Jun 2:54pm score of 1   in reply to comment 34     They've already fired Anderson, and hired KPMG. I'm somewhat doubtful of the integrity of the other Big 5 auditor/consultant scammers, but they haven't been caught yet, so my optimism is devout and unbreachable.... until further developments. I'd be curious as to how bold WDCM and AA were in capitalizing expenses. What are some of the expenses lied about? All Calculating American Satanists are Evangelical Christians   [ ...reply just to this | comment on the story... | next new ]

37.  Hypercapitalism   by mrwarmth       at Wed 26 Jun 8:25am score of 5 interesting     This news comes as an ironic coincidence for me. The company I worked for for eleven years went through a similar scandal in 1998, and it ultimately destroyed the company. Just yesterday one of my buddies from that company forwarded me the SEC investigation results, which contained indictments of the chief legal counsel and the head of European sales. Everyone had to pay back any stock profits they made on the bogus financials. So yes, Virginia, this has been going on for a while. I don't think it's enough, however, to lay this trend simply at the doorstep of greed. People in corporate America have always been greedy, and yet only since the mind-90s have these scams become commonplace. We have to ask ourselves why that is. The answer is simple. The shareholders rights movement in the 80s in the US led to a revolution in corporate governance. Prior to that revolt, shareholders were treated like cattle. You milked them every day, and threw them an apple every month. They weren't a force to be reckoned with at all, and their money could be freely spent without accountability. Europe is still very much like this. This was an injustice, of course, since public companies couldn't exist without shareholders. Starting in the mid-80s shareholders became very activist about their rights. They were aided, ironically, by the famous "greenmailers" of the day. Throughout the 90s shareholders became far more vocal about corporate governance, including institutional shareholder groups like CALPERS (the pension investment fund for State of California workers), and their voices shook the boardrooms of corporation after corporation. CEOs were no longer the Sun Kings of their companies, and were unceremoniously swept aside when they didn't perform. Three concrete changes emerged from this revolt: First, executive pay ceased to be mainly salary, and became instead mainly stock. This was how shareholders ensured that CEOs had a stake in the company's success or failure. Second, the job of CEO became quite precarious; most feeling they were only two or three quarters away from losing their jobs if things didn't go well. Third, the pressure to perform increased tremendously. Suddenly it was no longer enough to show modest growth from quarter to quarter, year to year. You had to show incredible rates of profit growth every quarter. Imagine the pressure that puts everyone under. To be specific, in corporate America today if you show a constant 20% growth in profits (not just a 20% rate of profit) from quarter to quarter, you are considered an also-ran. You need to show at least 30% profit growth from quarter to quarter to be considered a player. Moreover, as shareholders became more restless about making quick money now, the tiniest hiccough in financial performance began causing your stock to plunge, erasing billions of dollars in equity. In the past, corporations could announce small failures and not really suffer for it. Now any little thing can be a disaster (as Daimler learned to its rue when it released its first financial report in America showing a decline in profits - their stock tanked and the Germans were shocked by that). What this means in practice is that now public companies feel they have to lie through their teeth about even the smallest problems, because stockholders will destroy them. Because they want to double their investment every year - or else. That's a big difference from the patient, long-term stockholders of the 50s - 70s. Ironically, it also means that CFOs have to use very trick in the book to even out the flow of revenue from quarter to quarter, hiding profits in one quarter when they are inordinately high, because you don't want to be held accountable for a 30% growth from that freak high the following year. That's why a lot of these accounting tricks were developed - not originally to create bogus revenue, but in fact to hide windfall revenue and spread it out more evenly across all quarters. None of this is to blame stockholders exactly. However, the shareholder revolt led to corporate America becoming a pressure cooker, where the bar for success was set impossibly high. This created the environment where the pressure to hide bad news is often overwhelming, and where the rewards for showing success are out of all proportion to the actual accomplishment. What this means is that only those who will consistently deliver (or pretend to deliver) such results will be promoted to CEO or CFO. Which leaves most of the honest people in business out of the running. So one thing we have to take seriously is revising our hypercapitalistic expectations of corporate performance. We have to stop thinking that if our investment doesn't double or triple every year that we're being robbed, because it's that expectation that in fact is leading to our being robbed. -Niall Where is Ratko Mladic?   [ ...reply just to this | comment on the story... | next new ]

77.  Re: Hypercapitalism   by Anonymous Idiot       at Wed 26 Jun 1:11pm score of 0.5 informative   in reply to comment 37     To be specific, in corporate America today if you show a constant 20% growth in profits (not just a 20% rate of profit) from quarter to quarter, you are considered an also-ran. You need to show at least 30% profit growth from quarter to quarter to be considered a player. I've even heard this taken further, when I remember reading one financial report about a company that 'regretted' to inform it's shareholders that it's profit margin failed to increase by as much as it did the previous year. This is completely ridiculous that they're looking at the third derivative of their profit curve as an important factor... Their profit margin increased, but not by enough?? Some companies are happy to even be making a profit!   [ ...reply just to this | comment on the story... | next new ]   84.  Partial blame can be assigned to Taxes   by Anonymous Idiot       at Wed 26 Jun 1:55pm score of 0.5 interesting   in reply to comment 37     So one thing we have to take seriously is revising our hypercapitalistic expectations of corporate performance. We have to stop thinking that if our investment doesn't double or triple every year that we're being robbed, because it's that expectation that in fact is leading to our being robbed. Indeed. Part of this pressure is due to the capital gains tax. When gains due to the sale of long-term stock holdings are taxed at 20% (yes, it's lower than the 39% marginal rate most stockholders pay on their regular income), and stock dividends are taxed at the full marginal income rate, the pressure to avoid any decline in the value of your stock is increased by exactly that much. A reduction in the capital gains rate, and taxation of dividend income as capital gain rather than basic income, would help encourage stable dividend-producing business practices, rather than insane risky striving for the Big Hit.   [ ...reply just to this | comment on the story... | next new ]

39.  Not News   by MrTripps       at Wed 26 Jun 8:25am score of 2 interesting     WorldCom has been suspected of Enrot for months now (hard to find old references with all the new stories). I'm surprised that Wall St. acts as if it never knew. Personally I knew something was up when all the reliable well-trained folks in the Austin office bailed (within a week) and were replaced by former Dell phone support flunkies (no offense to them, but they were useless troubleshooting our lines and I got loads of shit for it). Enrot is a sore tooth in the American economy. Yanking that practice may hurt, but will be better off in the long run. "It feels like Independence Day and I can't break away from this parade." -The Wallflowers   [ ...reply just to this | comment on the story... | next new ]

46.  Saving the accountants from . . . themselves   by AugustIcon       at Wed 26 Jun 9:02am score of 3.5 astute     Auditing may seem esoteric, but these issues really go to the heart of creating an efficient and effective market-based economy. The underlying notion here is that markets work best when investors have confidence in market information. Thus, in the post-Depression era, Congress granted the accounting profession a legal franchise by requiring that corporate financial statements must be audited by an independent auditor. In effect, this means that every public company in the United States has to hire an auditor and every investor in the U.S. (at least theoretically) can rest assured than an independent third party has reviewed and signed off on each company's financial statements before they are seen by investors. The problem (as demonstrated by WorldCom, Enron, Adelphia, ImClone and all the rest) is that the system is not working. The Securities and Exchange Commission, in reaction to WorldCom, has stated that "accounting improprieties of unprecedented magnitude have been committed in the public markets". So, how do we solve this problem? First, we must determine its causes. To my mind, the root causes to this problem include: (1) the accounting profession's (grossly malfunctioning) self-regulatory system; and (2) the accounting profession's ferocious resistance to meaningful reform. The big accounting firms have been successful in beating back reform measures (spurred by decades of accounting scandals) for years due to their deep pockets and very active lobbying through the American Institute of Certified Public Accountants (a group that also oversees much of their self-regulatory structure - can you say "conflict of interest"?). It will be interesting to see how successful the AICPA's influence in Washington will be in the wake of WorldCom. At what point should U.S. lawmakers recognize that there is a superceding public interest? At what point should accountants themselves decide that it isn't worth the risk to the system, even if the consulting and other businesses you are in are lucrative? The accountants' over the top tactics (such as describing meaningful reform measures as constituting "the wholesale federalization of the accounting industry") should stop - accountants should speak up and say that the AICPA is not speaking for them. The biggest accounting firms should not be able to get fat and rich at the expense of U.S. investors and our market system.   [ ...reply just to this | comment on the story... | next new ]

50.  Re: Saving the accountants from . . . themselves   by VesuviusDC       at Wed 26 Jun 9:20am score of 1   in reply to comment 46     Do you work for the Senate Banking Committee or something?   [ ...reply just to this | comment on the story... | next new ]   76.  Re: Saving the accountants from . . . themselves   by Bearpaw       at Wed 26 Jun 12:59pm score of 1   in reply to comment 50     Do you work for the Senate Banking Committee or something? Do you have a meaningful response to AugustIcon? Or are you still beating your wife? Just like a true democracy, a truly market-based economy needs to be based on reliable information. Currently, that information is obviously(!) not reliable. Self-regulation -- that's what the current system essentially is, as accountants decide what rules they need or don't need -- does not seem to be working. Proud member of the reality-based minority.   [ ...reply just to this | comment on the story... | next new ]

48.  Why is this all being blamed on the Bush Admin?   by CynThetiQ       at Wed 26 Jun 9:06am score of 2 brilliant     Seems odd to me that everyone is blaming all of this on the current Bush Administration. How did most of this stuff come able to be within the past 1.5 years? Both WorldCom and Enron, and other companies were all doing this during the PREVIOUS administration. What I can't believe is that people (the sheep) didn't see ANY of this coming. Can't people see between the lines that something was a little shady when EVERYONE and EVERYTHING was posting double and triple digit profits buying this company and buying that company? I'm no financial analyst, but I know when something sounds too good to be true, it usually isn't. Plastic is synthetic, and so are mine. ( . Y . )   [ ...reply just to this | comment on the story... | next new ]

54.  Re: Why is this all being blamed on the Bush   by jdfan       at Wed 26 Jun 9:44am score of 0.5 disingenuous   in reply to comment 48     You're right... blaming it on Shrub is entirely short-sighted... we have Ron and Sr to thank for this.   [ ...reply just to this | comment on the story... | next new ]   69.  Re: Why is this all being blamed on the Bush   by nuckferr       at Wed 26 Jun 10:58am score of 1   in reply to comment 54     Yea, too bad there was no time for anyone else to intervene.   [ ...reply just to this | comment on the story... | next new ]   74.  Re: Why is this all being blamed on the Bush   by CynThetiQ       at Wed 26 Jun 11:51am score of 1   in reply to comment 69     are you referring to the 8 short years that Bill "Bubba BJ" Clinton was in office? Plastic is synthetic, and so are mine. ( . Y . )   [ ...reply just to this | comment on the story... | next new ]   78.  Re: Why is this all being blamed on the Bush   by jhe       at Wed 26 Jun 1:13pm score of 1.5 informative   in reply to comment 48     Reasonably, this isn't the Bushies fault, but...   Frontline recently had a thoroughly depressing story on the state of accounting standards. And, yes both parties have dirty hands on this one.* However, Arthur Levitt (lauded by those lefties over at the Economist for his insistence on transparency) was Clinton's appointee to the SEC chairmanship. Levitt notably fought for better disclosure for options on corporate balance sheets and auditor independence (both of which he lost/caved depending on how you look at it). Bush turned around and put Harvey Pitt, who was essentially an accounting industry lobbyist in the job.. To me this is a lot like the war on terrorism. 9/11 was not the Bush administrations fault, but , they did de-emphasize terrorism as a concern, when they came in and since 9/11 they haven't done much that might make sense and they have assaulted the Constitution (the real 'the terrorists will already have won' story). I don't blame them for Enron & WorldComm, but I do think that they are uniquely unqualified to do anyhting about it. Bush's fault? No way. Do I wish someone else were in place to fix it? You betcha.   What I can't believe is that people (the sheep) didn't see ANY of this coming. Can't people see between the lines that something was a little shady when EVERYONE and EVERYTHING was posting double and triple digit profits buying this company and buying that company? Here's the thing. You have investment banks making bu read the entire comment...   [ ...reply just to this | comment on the story... | next new ]   87.  Re: Why is this all being blamed on the Bush   by monobrau!       at Wed 26 Jun 3:46pm score of 1   in reply to comment 48     The Bush administration represents the mindset of "less regulation = good for business", a philosophy endorsed by thieves, frauds, polluters and businesses where people get injured or killed at work. Of course Democrat administrations have a hand in this as well, but Republicans make it a foundation of the platform. Bush may be new to the office, but he and his team have been fighting the fight for much longer. I think playing the adminstration blame game is a pointless exercise, but looking at the role that ALL members of an administration have played during thier careers in the state of the nation is important.   [ ...reply just to this | comment on the story... | next new ]

49.  Hunker down   by JackH       at Wed 26 Jun 9:06am score of 2 intriguing     I keep hearing people add the caveat that another Great Depression isn't coming. Well, take a look back - everyone didn't know in 1929 what was coming. It wasn't completely clear for a couple of years just how bad things were getting. What happens today may not be sufficient, but think of this more like the butterfly effect, or a game of pool. The other observation I have is that commentators keep alluding to a "loss of faith" in the system, and that there are ominous things coming if corporate America doesn't get its act together. They're right. Taken a look at our favorite dot.com deadpool site lately (www.fuckedcompany.com)? Once upon a time, nearly all the comments were slagging the "Office Space"-like environments that employees worked in. But something's changed - recently, the anger is more and more directed at executives, MBAs, and the whole zoo of financial icons of the '90s. People are dissecting financial statements. And the old Ayn Rand ethic is being replaced by what I can only describe as a populist one. The mood is changing - just about everything the very few critics of corporate governance and conduct in the '90s said is being proven correct before out eyes. And the storm is going to affect politics - after 2000, quite a few Democrats repudiated not only Nader personally, but his entire critique, explicitly embracing Clintonista go-go economics. But as company after company falls, those very same Clinton/Gore Democrats seem to have joined the economic juggernaut just moments before the wheels start falling off. The New Democrats staked their claim to legitimacy on the economy - but as the economy they've claimed gets shredded like Enron documents, their prospects are not good at all... "If you demonstrate a personality deficit in comparison to the likes of John Kerry, you've got major problems" - Anon   [ ...reply just to this | comment on the story... | next new ]

56.  Re: Hunker down   by DeaconDoWrong       at Wed 26 Jun 9:47am score of 1   in reply to comment 49     But as company after company falls, those very same Clinton/Gore Democrats seem to have joined the economic juggernaut just moments before the wheels start falling off. The New Democrats staked their claim to legitimacy on the economy - but as the economy they've claimed gets shredded like Enron documents, their prospects are not good at all... What on earth makes you think that the fallout from an anti-corporate environment will be taken out solely on the democrats (wishful thinking on your part, I suspect). Republicans, and Bush in particular, are and have been even more intimately linked with corporations that the democrats. Don't believe me? Feel free to check out the numbers for yourself. Bush was practically on the board of Enron for christ's sake! Do you remember that whole thing? You know, its so annoying, people refused to give Clinton any credit for the economy when it was good and now you're assigning him all the blame for the bad economy. Which is it?   [ ...reply just to this | comment on the story... | next new ]   63.  Re: Hunker down   by JackH       at Wed 26 Jun 10:09am score of 1   in reply to comment 56     Check out a www.pbs.org link for more details - the Bush years have simply been an extension of the Clinton years financially. And despite what Salon.com says, Clinton was just following in the footsteps of Bush pere and Reagan. And the economy wasn't that good for most Americans in the '90s anyway. Real wage growth for ordinary Americans happened only in 1998, and the financial classes, Republican and Democrat, promptly panicked. I never said the Democrats - I said the New Democrats - big-business DLC pseudo-liberals, like Lieberman, Gore and Clinton. There's a big difference, and I suspect you know it. There is more to the Democratic party than Bill Clinton, and for the Democrats to be credible on this, leadership of the party will have to be reclaimed from Terry "Global Crossing" McAuliffe and the other Clintonistas... "If you demonstrate a personality deficit in comparison to the likes of John Kerry, you've got major problems" - Anon   [ ...reply just to this | comment on the story... | next new ]   65.  Re: Hunker down   by DeaconDoWrong       at Wed 26 Jun 10:29am score of 1   in reply to comment 63     the Bush years have simply been an extension of the Clinton years financially. And despite what Salon.com says, Clinton was just following in the footsteps of Bush pere and Reagan. Agreed, but then it's not really Clinton so much as it is a broad national trend of the past couple decades. There is more to the Democratic party than Bill Clinton, and for the Democrats to be credible on this, leadership of the party will have to be reclaimed from Terry "Global Crossing" McAuliffe and the other Clintonistas... I agree that the problems with the current democratic party are many and various and include both strategic and ideological failures. However! I still disagree with your original point that today's economic problems will be taken out primarily on (new) democrats in the next election. I think a lot of this (esp. Enron) is still associated with republicans and Bush in the minds of the general public*, and not without justification. Why look toward the democrats that are most like republicans and not toward the republicans themselves. *(granted Bush's approval ratings are still high, but despite these issues, not because of them, I think we can agree. We'll see if the economy continues to go south- polls show the public still closely associates Bush w/ big business)   [ ...reply just to this | comment on the story... | next new ]

52.  The first thing we do...   by vurt       at Wed 26 Jun 9:27am score of 0.5 modappeal     is kill all the CEOs. I expect them to lie, but they could at least devote a little effort to it. "Our senior management team is shocked by these discoveries," CEO John Sidgmore said in a statement. "I want to assure our customers and employees that the company remains viable and committed to a long-term future." WorldCom, based in Jackson, Miss., outlined a series of drastic cost-saving moves, including an immediate plan to cut 17,000 jobs, or 21 percent of its work force, beginning as early as Friday. That action alone is intended to save $900 million annually, the company said. Or: "our remiaining employees (4 out of 5 ain't bad by Enron standards) have no cause--aside from likely further layoffs--for alarm." Make me sick. I hereby nominate Ash Poopem for new Worldcom CFO. Motto: "He may be incoherent, but he's honest. (Besides, who doesn't liek pokemon, lol?)" And if you're terminally bored / fall in behind the motorcade and lock the doors / money money!   [ ...reply just to this | comment on the story... | next new ]

53.  How Dare You Blame Our President!!!   by BatGuano       at Wed 26 Jun 9:42am score of 1 novel     What's all this Plastic blame being put on Bush, when it's obvious he's been working his ass off to fix the problem?!? He's showing these CEO's what's what, forcing them to clean up thier act, using his bully pulpit to change the whole corperate culture... Okay, I'm joking. It's a really sick joke, actually. Sure it all has roots in the Clinton era. But what's Bush doing about it? your radio friend, Bat Guano   [ ...reply just to this | comment on the story... | next new ]

64.  Bush promises "full investigation"...   by rekoil       at Wed 26 Jun 10:13am score of 1     Funny, Enron was a "corporate matter, not a government matter". But he's on Worldcom like a fly on dung. Hmm...   [ ...reply just to this | comment on the story... | next new ]

83.  Re: Bush promises "full investigation"...   by Vassago       at Wed 26 Jun 1:53pm score of 1   in reply to comment 64     "We're going to get to the bottom of this! A full investigation of those dishonest people at Worldcom! And while we've gotten you distracted with Worldcom, you'll forget all about my buddy and major campaign contributor and major author of my energy policy, Ken Lay and Enron."   [ ...reply just to this | comment on the story... | next new ]

70.  Bush vows probe of `outrageous' scandal   by call -151       at Wed 26 Jun 11:06am score of 1     This Yahoo story quotes Bush: We've had too many cases of people abusing their responsibilities... When we find egregious practices, such as the one revealed today, we'll go after them, and need to... I am deeply concerned about some of the accounting practices that take place in America... We will fully investigate and hold people accountable. Well, interesting how on the second go-around he's adjusted his response- of course, Worldcom doesn't hit him as close to home (location-wise and industry-wise) as Enron...   [ ...reply just to this | comment on the story... | next new ]

72.  The story is old, I know, but it goes on...   by infernalpress       at Wed 26 Jun 11:29am score of 1.5 interesting     How bad is it? According to the CSMonitor, over the last 27 months, markets have lost $5.5 Trillion, "or nearly three times what the US government spends annually." And as far as the whole "this all started in the 80s with deregulation" line goes... 1920: The Ponzi scheme: Charles Ponzi planned to arbitrage postal coupons--buying them from Spain and selling them to the U.S. Postal Service at a profit. To raise capital, he outlandishly promised investors a 50% return in 90 days. They naturally swarmed in, and he paid the first with cash collected from those coming later. He was imprisoned for defrauding 40,000 people of $15 million. 1929: Albert Wiggin In the summer of 1929, Wiggin, head of Chase National Bank, cashed in by shorting 42,000 shares of his company's stock. His trades, though legal, were counter to the interests of his shareholders and led to passage of a law prohibiting executives from shorting their own stock. 1930: Ivar Krueger, the Match King: Heading companies that made two-thirds of the world's matches, Krueger ruled--until the Depression. To keep going, he employed 400 off-the-books vehicles that only he understood, scammed his bankers, and forged signatures. His empire collapsed when he had a stroke. And my personal favourite: 1938: Richard Whitney: Ex-NYSE president Whitney propped up his liquor business by tapping a fund for widow read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

73.  What?   by PerryStroika       at Wed 26 Jun 11:45am score of 1.5 astute   in reply to comment 72     All of your examples, except for the 1938 one, came before the Security Exchange acts of the New Deal era, the ones that created the SEC and were designed to prevent fraud and reinforce investor trust. It also put into effect certain standards of corporate reporting to insure that companies couldn't get away with naked, outright lying to their own shareholders. "Just wanted to debunk the concept that fraud by Enron, Global Crossing, Merril Lynch, Arthur Andersen, WorldCom etc. has anything to do with 'regulation changes in the 90s.' These people were stealing from widows and orphans long before your parents were born." Fraud wasn't invented in the 90's. No one said that. But all of the recent accounting scandals are that much more disgusting because they reallly could have been prevented by stricter regulation. You can't wipe out every instance of fraud, but you can help to insure that such schemes are caught early and do relatively little damage and that the perpetrators for these crimes know that they're going to be punished heavily and without mercy. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   80.  Re: What?   by infernalpress       at Wed 26 Jun 1:25pm score of 1   in reply to comment 73     All of your examples, except for the 1938 one, came before the Security Exchange acts of the New Deal era. Ummm, yeah, and...? I didn't realize I could only cite examples of corporate malfeasance post-SEC. My point was simply that Wall Street fraud has been around a long time and is not a recent phenom. Since you asked, just check the link from my previous post for lots and lots of post-'38 examples of Wall Street fraud. "they reallly could have been prevented by stricter regulation" I disagree (good link, though). Who will implement this regulation? The politicians bought and paid for by the Ken Lays and Marc Rich's of the world? Not likely. And it won't be SEC commissioner Harvey Pitt. When previous SEC head Arthur Levitt proposed a ban on accounting firms performing additional services for companies they are also auditing (like the relationship Arthur Andersen had with Enron) Pitt led the Accounting firms against the change, and won. And where was he on the Merril Lynch investigation? It was right under his nose, but it took NY's AG to go after them. I don't put too much faith in him.   [ ...reply just to this | comment on the story... | next new ]   89.  Re: What?   by PerryStroika       at Wed 26 Jun 4:03pm score of 1   in reply to comment 80     "Ummm, yeah, and...? I didn't realize I could only cite examples of corporate malfeasance post-SEC. My point was simply that Wall Street fraud has been around a long time and is not a recent phenom. Since you asked, just check the link from my previous post for lots and lots of post-'38 examples of Wall Street fraud." Yes, and my point was that to say that "corruption has always existed and always will exist" (or something like that) is sort of correct but incomplete and misleading. Before the SEC was created the securities markets were total free for alls. Companies didn't bother finding loopholes in accounting laws or cooking their books to mislead the public, because they could just tell outright lies and total fabrications and get away with it. So while fraud has always been present on Wall Street, there are important differences between then and now. Most of the pre-SEC and Securities and Exchange Act scams were legal in those days but would be illegal today. And I would also add that stock ownership is much more widespread today than it was then and that this expansion of stock ownership to include regular, average people probably would not have been feasible without standards of financial reporting and regulation (as inadequate as it might be). What I objected to in your post was the, perhaps unspoken, contention that regulation never matters and the fraud appears to happen in all periods with about the same seriousness and frequency no matter what. This is clearly not true. There are periods of great vigilance, when new agencies and new enforcement powers are created and new laws are passed, and then there are periods when the public and the regulatory regime grow complacent; companies gradually invent new ways to cheat and steal to get around the now old laws, which cause a series of huge scandals, which brings on another period of great public attention and vigilance. And so on. In a sense, you could compare it to an arms race on both sides. The companies figure out new ways to cheat. New laws are passed to try to control them. Incidence of fraud are definitely not the same during every period and not of the same seriousness in all periods. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   96.  Re: What?   by infernalpress       at Thu 27 Jun 10:59am score of 1   in reply to comment 89     Before the SEC was created the securities markets were total free for alls. Companies didn't bother finding loopholes in accounting laws or cooking their books to mislead the public, because they could just tell outright lies and total fabrications and get away with it. Come on guy, there have been way, way too many outright lies and fabrications in the last year for you to claim that the SEC really does what you claim it does. The SEC is supposed to do the things you suggest, but of course it doesn't and never really has. Here's why (advance apologies for the c'n'p, but it's worth it, all emphasis mine): "No truly independent agency with the authority, power, or will to enforce penalties against illegal or unethical conduct watches the watchdogs. While the Public Oversight Board was a nominally independent private body that set standards for the industry's self-regulatory schemes, it was never truly independent - its funding came from the American Institute of Certified Public Accountants (AICPA) - the industry's powerful lobby group. According to testimony from a former POB member before the Senate Banking Committee in February, AICPA used its power of the purse to threaten the POB: According to the Consumer Federation of America, "the real authority over auditors lies with the SEC. It has the power to bar individuals and firms from auditing publicly traded companies. It also has authority to impose potentially substantial fines. In reality, however, the agency does not routinely review how auditors perform their audits, and instead delegates that responsibility to the AICPA and its Public Oversight Board." So, the watchdogs are watching themselves. Furthermore, according to past agency officials, the SEC only has the resources to tackle the very worst cases of alleged accounting abuse, and it typically settles even those cases without an admission of wrongdoing. It took no action, for example, against a former Arthur Andersen managing partner whom the SEC said had allowed persistent misstatements on Waste Management's financial reports to go uncorrected. Similarly, a PriceWaterhouseCoopers partner ordered by the SEC in 1999 to cease and desist violating securities laws didn't even lose his position as lead partner on the audit in question. Did AICPA ever take action? Not often, and not much, according to a major Washington Post investigation of the accounting industry. According to the Washington Post, AICPA took disciplinary action in fewer than a fifth of the cases in which the SEC imposed sanctions over the past decade. Even when AICPA determined that SEC-sanctioned accountants had committed violations, they closed the vast majority of ethics cases without disciplinary action or public disclosure." So if it's the industry's lobbying arm that is responsible for (not) enforcing disciplinary action against corporate criminals and (not) obtaining admissions of wrongdoing and those who steal millions of dollars go to jail for less time than non-violent offenders, I just don't see any regulation at all. I think the idea that there are waves of corruption followed by a "cleaning up" and then lobbyists gain more power, leading to corruption etc. like some mafia-business cycle is the traditional, but incorrect viewpoint. The corruption is/always has been there and any sort of "regulation," including the SEC, is a finger in a dyke. It's prime purpose is to "reassure investors" and a) is only window dressing and b) doesn't come close to actually providing investors with an independent advocate. Even all the "mad as hell" Pitt quote and the "Bush vows investigation" bullshit going on today is political post read the entire comment...   [ ...reply just to this | comment on the story... | next new ]   88.  the cheating at golf link   by GodSpiral       at Wed 26 Jun 3:49pm score of 1   in reply to comment 72     thanks In golf, my score is frequently below par on a pro forma basis," Buffett wrote in his most recent 2001 letter. "I have firm plans to restructure my putting stroke and therefore only count the swings I take before reaching the green." All Calculating American Satanists are Evangelical Christians   [ ...reply just to this | comment on the story... | next new ]

81.  hey Osama, never mind!   by gparizot       at Wed 26 Jun 1:34pm score of 1     Didn't bin Laden want to destroy the US economy? Looks like we may have beaten him to it. The terrorists didn't win after all!!! Now, you'll excuse me as I crawl under my desk and hold my legs, rocking back and forth. "Just 'cause you feel it doesn't mean it's there" - Radiohead   [ ...reply just to this | comment on the story... | next new ]

82.  Not True!   by Chasm007       at Wed 26 Jun 1:44pm score of 2 funny     WorldCon is in excellent financial shape. This year's read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

85.  As a former MCIWorldcom employee can I just say...   by CoFenchurch       at Wed 26 Jun 2:52pm score of 2 informative     BWAH HAH HAH HAH HAH HAH HAH HAH HAH HAH AH AHA HAH HAH (deep breath) HAH HA HAH HAH HAH HAH hah hah hah.... Okay, done now. When Bernie and his minions took over MCI, we knew the end was coming. Everyone knew he paid WAY more for MCI than what it was worth. And then he took away our tea and cocoa! How frickin' cheap is that? People started jumping ship like crazy when benefits went way up, they replaced the pension with a stock option plan, and then the stocks went in the toilet. Just to give you an idea, when I worked there, right after Worldcom bought MCI, our strike price was $49 after the split. They stopped trading them today because they were down to $0.83. 83 cents, folks. At the time, we were all pissed because it went down to $20 a share. Anyway, after I got fired for not being a "team player" (1) I bitched that Worldcom wasn't long for the world. I love being right! Although I do wonder how badly it will impact my former town of Colorado Springs. (Plus they just lost the Space Command, although they still have Pete Field, Cheyenne Mountain, Fort Cartoon and the Air Force Academy.) I was told that MCI was the largest private employer in town (the largest employer in town being the Federal Government). It isn't all just crapola telemarketing jobs, either-- there are a lot of software groups out there. I was a secretary for one of them. Don't miss it a bit. ________ (1)i.e. not wanting to buy Mary Kay from my Ken Doll Boss's Barbie wife(2) ___ (2) It's Colorado, they can fire you for any damn reason they please and there's basically not a damn thing you can do about it. Colorado's laws are the most favorable to the employer of any state in the U.S.   [ ...reply just to this | comment on the story... | next new ]

94.  So capitalism works   by kbrownecon       at Thu 27 Jun 6:52am score of 1   in reply to comment 85     So the guy who fired you for not buying Mary Kay is now ass-canned and has a worthless pension. Sounds like capitalism worked just fine without needing any "employee-friendly" labor laws.   [ ...reply just to this | comment on the story... | next new ]

90.  and the impact is?   by two       at Wed 26 Jun 8:48pm score of 1     Just curious, besides the folks in Colorado and elsewhere who will lose their jobs(17,000 of them which has got to impact at least several large cities), I heard a journalist on the radio saying that a third of all internet traffic is directed through Worldcom. I have yet to feel the personal impact of Enron, but could a bankruptcy affect even more than stockholder and employee lives?   [ ...reply just to this | comment on the story... | next new ]

91.  Re: and the impact is?   by PerryStroika       at Wed 26 Jun 9:11pm score of 1   in reply to comment 90     Who will be effected by WorldCom. The shareholders and employees. Okay. But also: -the general stock market because the accounting scandal contributes to questions about financial transparency. -telecom equipment makers. WorldCom is a big buyer of routers, switches, fiber optics, etc. For a company like Juniper, for instance, (stock symbol JNPR) Worldcom represents 10% of their sales. Cisco, Lucent and Nortel will all probably be effected somewhat. And not only will it effect future sales for those companies, but past sales as well. If WorldCom really does go bankrupt, they might very well have to take writedowns on money that they're owed because WCOM won't be able to pay it off. -banks and bondholders; they owe billions of dollars to various people and institutions and they might not be able to pay it off. -other telecom services companies who will have their stock prices taken down even further because of this. -longer term, the failure will help to bolster sagging internet infrastructure and long distance prices, as those sectors will probably have one of their largest players taken out of commission. As for how this might effect your internet service, it might or it might not. Probably not. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   92.  Re: and the impact is?   by two       at Wed 26 Jun 9:31pm score of 1   in reply to comment 91     It wasn't just my internet service I was worried about, but the tech sector itself (and not just the telecoms). But yes, stockholders, shareholders, bankers, the domino effect of subcontracting companies I was quite sure of. The most interesting aspect of your reply was the longer term prediction. So the competition gets taken out because of greed and corruption and things get better? That's the most uplifting thing I've heard on this topic. Thanks!   [ ...reply just to this | comment on the story... | next new ]

93.  My life as CEO   by greenbeard       at Wed 26 Jun 9:58pm score of 1     Compensation based on Stock Options is a big big part of the problem here folks. [scene] Sitting in my office I dream of a new jet. The nice kind with the quiet engines and the fancy I-talian leather seats. Not wanting to dip into my swiss bank account I call up Phil, my HR VP. "Phil", I say casually. "Fire 10,000. I want a press release first thing in the morning." Never fails to move the shares a buck or two. Just enough to cover that Lear I was looking at. Just then my PDA tells me that I have a golf game with my VP of Lobbying to get to. On my way out I call my man over at Goldman. "Tommy, get ready to sell most of my options tomorrow. You will know when to sell." Note to self: Call the new accountant and verify that all assets were successfully transferred to the offshore accounts. [scene] When a fairly small number of people benefit disproportionately from the movement of the stock price you can better believe that there will be a lot of funny business. Remember the golden rule? (He with the gold makes the rules.) The stock market has ceased to be a capital mechanism and turned into a giant straw for those at the top to suck dry. All of this mantra about the magic of the markets is just PR to get you to buy into the system. The answer to the question of why people in power behave so poorly toward others would be interesting. However, until these jokers are made into someone else's bitch for a change will behavior be modified. Especially since nobody bothers to vote and thereby hold the government accountable. You will get a tap dance and a bunch of finger pointing lots of small fines. greenbeard First you get the money. Then you get the power. Then you get the money. PS> Hey! If the government defaults on the debt will they be audited as part of a restructuring? I hope they don't have any shell games going on that their auditor knows about.   [ ...reply just to this | comment on the story... | next new ]

95.  They committed fraud   by kbrownecon       at Thu 27 Jun 6:56am score of 1     They committed fraud and now they're going to jail. Sounds good to me. Blaming deregulation for fraud is like blaming roads for drunk driving.   [ ...reply just to this | comment on the story... | next new ]

97.  Um, no...   by ElectraSteph       at Thu 27 Jun 12:53pm score of 1   in reply to comment 95     It's more like blaming the bartender who served the drunk driver 12 shots before kicking him out of the bar for drunk driving. He didn't force the guy to DUI, but he sure made it possible, and even like likely, that the guy would. Same goes for deregulation -- if you say "we're not going to watch you or protect anyone against your potential bad behavior" you're just opening the door. Had the regulations been in place, the opportunity to commit the fraud wouldn't have been there. -- commonplacebook.com   [ ...reply just to this | comment on the story... | next new ]

99.  Ice cream parlor ice cream fraud   by call -151       at Fri 28 Jun 4:28pm score of 1     Paul Krugman has a very well done op-ed piece in todays New York Times, translating many of the recent accounting scandals (Enron, WorldCom, Adelphia, and Dynergy) into the finances of running an ice cream stand. It's hilarious and insightful... And pretty scary as to the unresolved conflicts of interest that encourage this these days...   [ ...reply just to this | comment on the story... | next new ]