WorldCom to File for Chapter 11 Protection

Mantour writes: "To everyone's big suprise ;), Worldcom is going for Chapter 11. 'The Chapter 11 filing by WorldCom would follow once high-flying companies like energy trader Enron Corp. and Global Crossing Ltd., which crumbled into bankruptcy amid a crush of accounting investigations by federal regulators.' You can get more info in this Yahoo story" Update: 07/22 12:21 GMT by T : mnordstr points out a CNN report calling this "the largest bankruptcy ever."

Meaningless at this point

[Ars-Fartsica]

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

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

What effect will this have on UUNet?

[Anonymous Coward]

What type of effect will this have on UUNet and Internet service in the United States in general?

Re:What effect will this have on UUNet?

[Boulder Geek]

None whatsoever. For now. Chapter 11 gives a company time to operate while it re-organizes, sells units, etc... without having to pay back creditors. It also means that pretty much everything that it does will have to pass muster with a bankruptcy judge, so it isn't a free ride. Eventually enough assets will be sold and the creditors paid off so that the company can emerge from Chapter 11, probably as a smaller, more focused organization. Or they may find that they cannot generate enough cash to pay off their creditors and then go into Chapter 7, at which point all the remaining assets will be liquidated.

So, Here's the Question

[Fished]

I am a Worldcom employee, and here's my question, that I cannot seem to find an answer to anywhere. What does this mean to employees? I find lots about investors, bankers, and bond-holders, but very little about employees.

Re:So, Here's the Question

[kgasso]

What about customers as well? If this "re-structuring" fails, I can only assume the feds will step in and try to keep the company on it's feet being their basically a telecom giant. Hell, they did it for a mid-sized local company [alphatelcom.com] after they went under in a less-than-glamorous manner.

Right about now I'm thanking my lucky stars we believe in redundancy through different carriers for our circuits.

Re:So, Here's the Question

[stripes]

What about customers as well?

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

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

Re:So, Here's the Question

[Com2Kid]

Assuming they are selling a service at a cost that at least covers current costs

They wouldn't be in this mess in the first place?

. . . .

Re:So, Here's the Question

[stripes]

They wouldn't be in this mess in the first place?

No, not at all. The pre-bankruptcy price would have to cover any deployment and other initial set up costs. The post-bankruptcy price only has to cover ongoing costs because they will write off almost all of the debt. So right now a $1000/month T1 would have to cover some share of the $30B debt, including the price to build the OC-48 (or OC-192 or whatever it is now) backbone. That might in theory be $600/month of cost, leaving $400 to pay for the circuit charge, tech support, and other stuff. After bankruptcy that $600/month part goes away...or turns into $12 or so.

You can have a company that is losing money pre-bankruptcy, and makes money after without changing it's practices at all! At least in theory, I doubt the bankruptcy courts would let you do it, so they would be some un-needed changes (maybe useful ones though) to mask that.

Re:So, Here's the Question

[Com2Kid]

No, not at all. The pre-bankruptcy price would have to cover any deployment and other initial set up costs. The post-bankruptcy price only has to cover ongoing costs because they will write off almost all of the debt.

If somebody had done their calculations right though, deployment costs would not have been a problem in the first place.

Basically you are saying this will shoot their profit level up to where it would have been after all debts had been paid off (or a little higher then where it should have been now if things had been operated properly. . . .)

Personally, I am against proceeding on so many fronts that I forget what in the world I have still to pay over from my past battles! WorldCom got into this situation, heck, even giving them the benefit of the doubt that each one of their acquisitions was going to be profitable some day in the future (doubtful. . . .), they ate up so much so fast that now they are about to explode.

. . . .

*sighs* Of course I don't see why companies really bother going public, stupid from what I can see. If you don't have the revenue stream coming in already, then you don't need additional funding, you just need a better plan!

Re:So, Here's the Question

[stripes]

If somebody had done their calculations right though, deployment costs would not have been a problem in the first place.

Sort of, yes. One problem though is a OC-192 from DC to NY costs the same amount of money whether you have one buy paying you or 85,000 of them. You have to make an assumption about how many people will buy your service so you can estimate how much each on of them has to contribute to the cost of the shared resources. If you guess too low then your prices are too high, and you can't sell enough of the product. If you guess too high you price the product too low and lose money on "each one sold" (but at least you lose less money as more sell!).

With the products WCOM sells, or at least the UUNET part almost all the cost is the backbone (shared!) and emploies (shared!). So the whole price more or less comes down to "how many will we sell". Also when spending in the area takes a downturn it drives you costs up. Which sucks.

Those are all the good reasons not to be able to accurately estimate costs. The bad reasons are they hadn't really had to in the last decade, and never really got in the habit of doing it. So low (or negative) profit products were rescued by high profit ones. In some cases without anyone knowing really. In other cases with people knowing, but it isn't really to your advantage to announce the product you are working on is losing money, now is it? (connect the dots on that on yourself)

Basically you are saying this will shoot their profit level up to where it would have been after all debts had been paid off (or a little higher then where it should have been now if things had been operated properly. . . .)

No, well above that because any capital equipment that wasn't payed for is now free. Any contracts that were the best-possible-price 3 years ago can be re-negotiated now for the new lower prices that fibers "enjoy". Only some of this is just plain being able to adjust prices back to where they should have been! A lot is stuff that really couldn't be done otherwise.

Personally, I am against proceeding on so many fronts that I forget what in the world I have still to pay over from my past battles! WorldCom got into this situation, heck, even giving them the benefit of the doubt that each one of their acquisitions was going to be profitable some day in the future (doubtful. . . .), they ate up so much so fast that now they are about to explode.

Look, this is generic bankruptcy law. It applies to the 2nd largest telcom. It apples to the little bakery down the street form you. It applies to toothpaste makers, and car makers. This isn't a talk about what is being done special because the failure was so huge, it is just what happens to a company that can't pay it's bills, but doesn't want to give up.

I'm not real fond of it myself. I don't know enough economics to tell you if it is on the whole a good thing (it does better preserve the bundled value of things then just giving WCOM's assets to it's creditors) or a bad thing. I know the bankruptcy of dot-bomb companies makes things harder on WCOM and other ISPs because they are stuck with debt form their coutmers, so maybe without such laws not as many telcos would be dragged under now. Or maybe they would. (WCOM being a special case as it looks more like book cooking got them here, not ISP debt...but it is kind of hard to tell from what I read in papers, and even when I worked there I never moved in those circles!)

*sighs* Of course I don't see why companies really bother going public, stupid from what I can see. If you don't have the revenue stream coming in already, then you don't need additional funding, you just need a better plan!

Not true. It is just the "I have a great idea, and all I need is $100,000 to make it happen, so I'll get a second morgatage on my house and do it!" writ large. I was at UUNET before it took on cash from the VCs and things were tight. After we took on the money we spent like nobodies business, and were losing money hand over fist (because we had a more expensive backbone that we had customers to pay for for a few years...but there was no real step between 10Mbit-that-blew-dead-goats-if-you-used-more-then- 6Mbits and 45Mbits!). Not long after it went public it was turning a real profit. I doubt it stopped until long after it was bought by WCOM. So the VC-IPO route worked. The merger part didn't so well because very large companies have dis-economies of scale (I do have enough econ to know that!).

Re:So, Here's the Question

[rodgerd]

Their core business (Internet connectivity and telecommunications) may be sound; it may be sundry other ventures that have dragged them down.

Corperate welfare is BAD

[HanzoSan]

Why should we pay tax dollars to keep a monopoly up and running? I hope the government doesnt step in, the government should never step in to save any company unless its an absolutely vital company such as a food company, or water or electric company where peoples lives are on the line.

Worldcom is a communications company and I hate this corperate welfare shit, we cant get welfare, so why should they?

Re:Corperate welfare is BAD

[Maeryk]

Why should we pay tax dollars to keep a monopoly up and running? I hope the government doesnt step in, the government should never step in to save any company unless its an absolutely vital company such as a food company, or water or electric company where peoples lives are on the line.

Umm.. we should because, simply put, people who are employed spend money. People who are unemployed DONT spend money. Thats basic economics. The situation right now is a very rare one.. the stock market has slid for 19 straight weeks, yet the economy is actually on a slow but steady increase. HOwever, a whole heck of a lot of people losing their jobs would rather suddenly change that swing up to a swing down.

Worldcom is a communications company and I hate this corperate welfare shit, we cant get welfare, so why should they?
I dunno.. why the hell should the government step in when a major sport strikes? Cause it keeps people happy. It would depend on who Worldcom serviced, and the ability of their customers to get rapid replacement service if they went down. That would probably have more to do with the decision to offer corporate welfare or not. Sometimes it is easier all around to throw some money at a company that may be able to restructure and survive than it is to let it fail and leave a lot of people out in the cold.

However, the alternative is in plain sight. THe only industry in the world that can mistreat its customers every step of the way are the Airlines. They got bailed out, hence meaning they can mistreat even MORE customers without even having to worry if they lose them or not. (SOrry.. personal rant.. my wife is now stuck in Charlotte NC because the airline had "mechanical failure" (read.. six people waiting for a large plane, which they dont want to fly) and they are making noises about canceling the later flight as well. (Same six people.. ).

Maeryk

Re:Corperate welfare is BAD

[rodgerd]

Umm.. we should because, simply put, people who are employed spend money. People who are unemployed DONT spend money. Thats basic economics

So? By that rationale, the US government should be handing over money to HP and any other company that has fired staff. Businesses fail all the time. The only difference is that Worldcom's failing in part because of massive fraud. Most economists take a dim view of governments presenting an incentive for dishonest behaviour, which is what you're suggesting.

Re:Corperate welfare is BAD

[nobody69]

THe only industry in the world that can mistreat its customers every step of the way are the Airlines.

That's impossible. The airlines were once heavily regulated, but were desparate to get out from under the yoke of the feds. When they got their wishes granted, all airlines instantly became the highly profitable companies with ecstatic customers that the feds kept them from being. Everybody knows that the free market is always perfect. Any other information is propaganda.

Re:So, Here's the Question

[stripes]

What does this mean to employees?

It means if they do let you go they only have to pay out about two weeks of vacation tops as severence. There are also limits on expense reimbursment. On the other hand you paycheck is about as protected as it gets. Unless of corse they lay you off.

It also means they are (I think) less stringent requirments for the layoffs and such. It also means they are prohibited by law from paying off any pre-chap-11 debt, and nobody can deny then continued service on contracts so long as they pay the new bills. Which makes it a lot eaiser to stay in busniess.

You are just another liability/asset

[Ars-Fartsica]

They will judge your division based on its relevance to the "new" corporation (Which will be focused on data transmission). If your division doesn't make the cut, you can assume that either:

1)The division will be bought outright by another company.

2)The capital equipment will be sold off and the employees fired.

Re:So, Here's the Question

[constantnormal]

In ANY company, employees are given the least consideration. They are viewed simply as a consumable resource, like fuel oil or coal (hopefully a bit more environmentally friendly). If Worldcom had a substantial fraction of its shares owned by employees (a horrible thought, on the face of it, to lose one's job and assets at the same time), they might have a say in the way things go, but as it is, you are merely a part of the machinery. If whoever buys the part you support does not already have people to perform that function, you may get to keep your job (albeit with different pay and benefits), but if a company in a similar business purchases the business unit you work for, unless their people already have more than they can handle, the plan will be for them to do the work you do now.

The other possibility would be if Worldcom was close enough to making a go of it that they did not need to sell off parts of the company, merely a reprieve from debt payments. Or if you work in whatever part remains, you may keep employed -- again, at different pay+benefits.

Hopefully, the retirement savings managed by the company were not used to prop up the collapsing stock price (so the pirates running the show could grab a bit more loot), as was the case at Enron.

The lesson to be learned here? Try not to work for crooks -- a pretty difficult proposition, nowadays.

Re:So, Here's the Question

[Pig Hogger]

I am a Worldcom employee, and here's my question, that I cannot seem to find an answer to anywhere. What does this mean to employees? I find lots about investors, bankers, and bond-holders, but very little about employees.

It means that you're the weakest link [nbc.com]. Bye-bye!!!

Re:So, Here's the Question

[Em Emalb]

your comment is rather amusing, but damn slashdotters, have some compassion. This poor dude is looking at a very uncertain future, and was looking for a little help. Not a direct attack at you Pig Hogger, but as someone who went through a similar situation with Lucent, getting the same "no information because you are an employee" crap, it hurts, and leaves you confused and upset...not to mention worrying about that next paycheck and bills you have.

So, folks, show this poor person some compassion will ya? I'm sure the majority of us out there have had the rug pulled out from under us. Not fun in the least. You can laugh if you want, but when it happens to you, the song sounds alot different.

As someone who has been through this..

[Maeryk]

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

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

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

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

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

Maeryk

Re:So, Here's the Question

[truesaer]

Well, IANAL, but I think the only concern of bankruptcy is how to settle with creditors. In the case of Chapter 11, it also involves restructuring the company to run in the black again.

Employees are creditors in terms of salary owed, but being small creditors you have to get in line behind all the banks, vendors, etc. that have larger stakes.

In other words, you maybe keep your job, and if not you may get lucky and get paid before you're let go. But dont count on it.

Re:So, Here's the Question

[IO ERROR]

Here's a handy guide for translating business buzzwords into plain English:

restructuring -> massive layoffs and selloffs
improper -> we got caught
proper -> we didn't get caught
we believe -> no way in hell will this happen
misleading -> blatant lying

Based on this, I suspect your job is in jeopardy.

Chapter 11 is not the end

[Charm]

Not all companies that file for bankrupcy go broke. Otherwise no-one would file for it.

No, but many do.

[Ars-Fartsica]

No oen file for Chapter 11 unless they really are looking for the defribilators. Previous comments in other /. discussions would seem to naively indicate that its just a casual decision to be made when the wind drifts the wrong way.

No. Once you file, you are basically saying that you are an unreliable debtor. That means your corporate bonds are worthless. That means you cannot fund further growth. That means the capital equipment that allows you to operate at all may have have to be auctioned.

Also remember that WorldCom operates in a market that is in terrible shape with crappy prospects even should they somehow survive. I suspect this bankruptcy will act as a huge wave of consolidation in a dead market.

Re:No, but many do.

[stripes]

No. Once you file, you are basically saying that you are an unreliable debtor. That means your corporate bonds are worthless. That means you cannot fund further growth. That means the capital equipment that allows you to operate at all may have have to be auctioned.

But if there is no longer a need to fund more capital growth, for example in a flat or declining market, then you don't need to fund more growth. So this disadvantage may not matter. Also they can if they achieve profitability fund more groweth by taking it out of their profits. That is how UUNET operated when it make it's T1 backbone, and the "10Mbit" backbone. There was no investment money until the T3 backbone. It is how a lot of componies operate!

That doesn't make the crappy bond rating a good thing, but the trade off is you get to avoid all old debts for a few months, and then strip off most of them (like 90% to almost 100%) before you reemrge from bankruptcy.

Re:No, but many do.

[Ars-Fartsica]

But if there is no longer a need to fund more capital growth, for example in a flat or declining market, then you don't need to fund more growth.

Then the stock is really of no interest to any investors. Every company needs to grow and diversify, or investors flee. This is why large companies make acquisitions even when they have stable markets.

Re:No, but many do.

[stripes]

Then the stock is really of no interest to any investors. Every company needs to grow and diversify, or investors flee.

Or it has to pay dividends. However for a bankrupt company stock price is a far off dream. If it has to wait years before it can make capital investments because that's how long it takes banks to trust, well that's how long it takes. Given how crappy the telcom market is now, and how overbuilt the networks are, there may be no need of large capital investment for as long as WCOM's credit is bad anyway!

Re:No, but many do.

[Com2Kid]

Then the stock is really of no interest to any investors. Every company needs to grow and diversify, or investors flee.

That is what is wrong with the system, the desire for more more more

This is why large companies make acquisitions even when they have stable markets.

And why things come to a crashing halt in the end! bigbigbigbigbigbigbigbigBIG, BOOOOM! All comes crashing down. Lovely. Bleh.

Too many good companies (not to mention potential scientific advances even!) have been ruined by some asshole beancounter doing shit out of his/her league. Once everything is running smoothly and a profit is being turned, the bean counters should be rounded up and sent back to their cages, not needed any more, get, shoo. Yeesh. But noooo, somebody lets them keep on running about and go around gobbling up companies until some big megacorp gets so bloated that all hell breaks loose.

Support your local telemarketers! =^_^=

[dacarr]

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

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

Re:Support your local telemarketers! =^_^=

[negativethirsty]

well that and me cashing all those $100.00 checks they'd pay me to switch my long distance service (i'm not kidding). Musta given me 3 of them before they stopped heh.

Bush really dropped the ball

[evilviper]

So, Bush wanted to American people to think he was doing something about the rashes of corporate corruption. So what does he do? He creates a task force, and doubles the (very small) penalties for this sort of thing.

You know what he should have done... If he had said that this sort of activity will fall under the mob laws, this would stop, and we'd know the president was not corrupt. If that happened, that would mean anyone involved in illegial activity would have full liability. You wouldn't just get 10 years in jail, then get out with all your ill-gotten money in-hand. The feds would be able to take away all your assets to pay off debts. Houses, cars, bank accounts, all taken away.

But then half of congress would end up in jail, and probably Bush himself.

What Bush really wants...

[Ars-Fartsica]

...is for all of this to go away. He hates it, because deep down he really is a back-slapping, insider-trading, nudge-nudge-wink-wink sort of guy. His dad was too. They're so "inside" they don't even know what "outside" looks like. Bush has no constituency "outside" this group of back-slapping robber barons.

Its telling that stocks actually drop in real time when he starts talking about corruption.

Re:Bush really dropped the ball

[Edmund Blackadder]

The problem even in the middle of the mass histeria every one is pretending that the offshore banks where all the execs store their loot do not exist.

So even if they take away all their houses cars etc, they would still be billionares.

What they have to do is actually go out there and get that money. Or at least prevent others from putting money there.

Re:Bush really dropped the ball

[weave]

Nonsense, corporations can police themselves. They don't need more regulations.

Oh sorry, that was Bush circa 2001.

Re:Bush really dropped the ball

[Surak]

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

The legal system has never been able to stop corruption. Corruption goes back at least to the time of Hammurabi. Probably earlier.

Laws are a deterrent, but not much of one.

Re:Bush really dropped the ball

[Zeinfeld]

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

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

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

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

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

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

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

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

Re:Bush didnt really drop the ball congress did

[Maeryk]

LOL.. this is almost funny. I love the fact that it is THE one guy in the hot seats fault. Not Congress. Not the SEnate. Not the last eight YEARS of ignoring signs and worrying about guys selling sawed off shotguns in the mountains rather than corporate scandal and greed.

There is a cycle here you'se guys arent noticing. (Or arent mentioning, anyway). After *EVERY* huge economic gain in this, our american society, companies tank like this. Its called "spending money you dont have". Hate to be a bible quoter.. but "Neither a borrower nor a lender be."

The issue isnt as much with the government allowing the companies to regulate themselves.. it is with the BANKS looking to turn huge profits on overnight and offshore loans. See, thats where the banks make money. ANd if they would pass anything more than even a cursory glance at a company's books, they might catch the cookage instead of loaning 3B to a company to aquire another company, and find out six months later its all cotton candy.

The president has a certain amount of expectation to speak on this, but he has no REAL control. He cannot magically wave his pen and make longer prison sentences. That requires an act of the full government. ANd as stated, they wont do it. How many of them do you think have taken payoffs from various companies? Or money for their camppaigns? Or thrown huge bones to these companies in pork barrel politics? If anyone, your senators and congressmen should be the ones you are screaming bloody murder to. Not the PResident.

Maeryk

Re:Bush didnt really drop the ball congress did

[istartedi]

Close, but no cigar. I've mentioned this before other places, but it needs mentioning again.

The real issue, the one that remained unresolved throughout the 20th century, is this:

Sometimes, there is really nothing to do.

Let that sink in for a minute.

In the 20s, we all got mobile with cars and got wireless with radio (RCA was like Yahoo!).

Once most of the people who wanted model-Ts and vacuum-tube sets had 'em, the market saturated, the bubble burst, and people couldn't figure out what to do.

It took WW-II to get 'em interested in something again. The sequel involving Communists and a space race was pretty exciting too.

Then in the early 90s, no more Commies (none that really mattered, anyway) but that was OK because computers had been rolling along quite nicely (a spinoff of the space race, actually) and the Internet, whoooh boy! That was something.

The first warning sign was when computers actually fell in price. For years, they were about $2000, and they kept getting faster. When they started noticeably dropping in price circa 1997/1998, I remarked that we might be getting saturated. We are now certainly saturated. Almost everybody who wants a PC has one. Almost everybody who wants dial-up Internet in the US has it.

Broadband might have helped us, but this is now an area where the bad economy feeds on itself: consumers won't shell out for broadband when the next paycheck is in doubt. They may even cancel their dialup.

People need something to do. They want something to do.

I believe FDR actually had the right idea with some of his programs--the ones that built lasting infrastructure such as the TVA and Skyline Drive (note, the forced relocation of mountain people was poor execution, but the *idea* of creating a recreational area was a good one). The problem is that GWB is imitating some of FDR's mistakes when it comes to creating *permanent* beurocracies. The biggest of these mistakes was social security, which is just a big Ponzi scheme that has to collapse sooner or later.

When people don't know what to do, government spending can be a viable option, but it needs to be temporary, constructive, and produce something useful. How about grants for commuter rail in cities where it would be appropriate (e.g., full funding for the Las Vegas monorail would be really cool). How about an Apollo type program to create 100 mpg and/or alternative fuel cars that people will actually want to buy?

Instead, we will probably just create a few more government agencies.

War is an option too, but with the US reluctance to actually get involved with postwar reconstruction efforts, it seems like a bad idea. Already, the Afghan government is showing weakness because of our reluctance to really help stabilize it. If Karzai can't maintain power, GWB will be a domestic *and* a foreign failure. I doubt we'll do much better in Iraq. It's a real pity too, because I bet we could *easily* round up 50,000 military-age people who would be willing to go to Afghanistan and keep it clean until the locals learned how to be civilized. It's the old men that don't have the stomach for it these days--a complete reversal from the 1960s.

Re:Bush didnt really drop the ball congress did

[kubrick]

LOL.. this is almost funny. I love the fact that it is THE one guy in the hot seats fault. Not Congress. Not the SEnate. Not the last eight YEARS of ignoring signs and worrying about guys selling sawed off shotguns in the mountains rather than corporate scandal and greed.

Bush may not personally be responsible, but he and his father are so much involved in this sort of behaviour, and have been throughout their careers, that it's good to see the chickens coming home to roost.

I personally wouldn't be investing unless I had enough money to be a whale, rather than plankton, so to speak. Otherwise I'd be gambling on other people's honesty and the mechanisms of the State for reparation... and neither prospet fills me with confidence.

Hate to be a bible quoter.. but "Neither a borrower nor a lender be."

Isn't that specific phrasing from Hamlet, and wasn't Polonius being represented as a sanctimonious fool throughout the play?

Re:Bush didnt really drop the ball congress did

[Maeryk]

Saying the banks could have just looked deeper and found the inconsistencies is like saying that if someone goes into a bank with a fake ID, and gets a loan under an assumed ID, the bank is at fault. The wole idea is that WorldCom broke the law by falsifying records... That means it would take a full fledged investigation to determine something was wrong. Come on, it's not unreasonable for a bank to assume a company is not breaking the law.

Why not? They assume I am breaking the law every time I cash a check with them. Some of them wont even honor checks drawn on their own accounts unless you have enough money in your OWN account with them to cover the cost of the check. Have you ever gone for a mortgage? I have had less invasive background checks done by the police. (but we wont go into that now.)

It lies on the bank to secure its billions of dollars of its depositors money. After all, theoretically, the bank answers to us, the peoples money who keep it afloat day to day.

Blaming congress rather than the president is borderline. The President is the Chief Executor and Chief Legislator. If he had exercised his powers to attempt to get such laws passed, and the senate did not go along with it, I would agree with you. However, it is also true that the Senate could do so on their own (but that takes much more time).

Hmm. You have a point. However, Bush has a very tough fight to get ANYTHING through congress at this point. There are enough Dem's on the hill who have sworn to oppose just about anything he tries that he has to be rather picky and choosy about what he tries to get done. And I think he has bigger fish to fry. (Or, thought he did, what with buildings blowing up, a war in the middle east, and another two wars brewing, one between Palestine and Israeal, and one between Pakistan and India). I think he's been pretty busy with other things, truth be told. But laying all the blame on him is kind of silly. Especially when these things *HAVE* been happening for the last umpteen years, and no-one else has had the desire to do anything about it either.

Again.. it boils down to how much money these CEO's and their respective companies have put in the pockets of the people who refuse to regualte them.. or the people who refuse to prosecute when they do get caught. Or who choose to hand forth extremely lenient sentences when they finally come before a judge or a review board.

After all, the laws already exist to enforce punishment on these things. Not everyone gets the Michael Milken Club Med prison treatment.

You could have fooled me. That's exactly what it appears to be. A corporation is designed with the intent to do anything within the law to make money. That mindset is a dangerous one, which is why companies are subject to laws designed specifically to regulate corporations. The fact that individuals inside a company went just too far is not unusual

You are right. It is not unusual. It should be however. The laws should be changed so that those responsible for running the companies into the ground at the expense of the stock holders and the workers should be personally liable. Their golden parachutes and multi-million dollar palaces and perks should be at risk, as well. Those smart enough to take their cash out before it gets ugly and sink it into material goods should lose those goods until they are in the position of those they have damaged on the way.

Of course, a lot of this would not happen if investors had a clue. The market of recent years has been one of rapid wealth and fast returns on big buys. That can only lead to artifially inflated stocks, and huge amounts of cash trading hands. Look at RedHat.. and see what ESR said about his "sudden millionaire status" when they IPO'd. He said he couldnt touch it for six months.. but a lot of other people made a lot of money on that stock in the first couple of days it was out. The system isnt broken.. but it sure aint perfect either.

maeryk

If that's the answer, what was the question?

[Kohath]

I wonder if you even know who at Worldcom is to blame, and exactly what that person did wrong. How about thinking a little more and pointing fingers a little less?

My suggestion:

Someone from Worldcom (and probably someone from Arthur Andersen) should stand trial under the current securities fraud laws, and if found guilty, be sentenced.

Not very appealing, is it? When it comes to vengenance, envy, hate, and petty political gain, I guess The Law just isn't up to the task.

Re:Bush really dropped the ball

[evilviper]

If I could do 10 years and come out with 100 million or there abouts, I'd be more than happy to.

Just think, how many years are people working, just so they can get a small retirement check, that gives them just enough money to stay alive.

Besides, were not taking about state prisons, where you are thrown in with gangs and murders. Were talking about easy time at a federal pen with all the rest of the white-collar criminals.

Re:Bush really dropped the ball

[Fjord]

Conjugal visits? Not that I know of. No, 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 someone's bitch. Then everything will be alright

Obligitory Office Space ref:

[Kredal]

Come on, Samir.. they even have conjugal visits there. It'll be great!

Re:Bush really dropped the ball

[_Sprocket_]

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

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

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

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

Re:Bush really dropped the ball

[Angry Toad]

Indeed. This is a line you see a lot these days (from Republican attack robots like Anne Coulter). The FACT is that it is a consequence of Gingrich-led Republican-initiated deregulation. The government "got off the back" of big business.

Re:Just one catch...

[Angry Toad]

Organized fraud leading directly to the impoverishment of tens of thousands and loss of thousands of jobs? Knowing and conspiratorial breach of trust at a public company reaping tens or hundreds or even billions of dollars in illicit profits? These are not serious crimes? Apparently some sadsack loser trying to sell an ounce of dope to some other pathetic nitwit is committing a bigger crime. Sheesh.

Re:Just one catch...

[rodgerd]

Which affects most people more, right now?

as quoted in the Atlanta papers

[Anonymous Coward]

WorldCom was the only Fortune 500 company in Mississippi. That figures. Wouldn't you just know it? WorldCom, the biggest fraud in business history, is headquartered in a town named Clinton.

Making out like bandits

[Dr.Hair]

WorldCom will make out like bandits in bankruptcy. They have revenue unlike most of the deceased dot coms. The one issue is the mass of debt they had, mostly from the consolidation and takeover mania of the 80s and 90s. Remember WorldCom was a guppy swallowing whales like MCI and UUNet through bank leveraged buyouts. In Chapter 11, WorldCom can write off most of that debt and leave the banks holding the bags (kind of like real estate and the S&L crisis of the 80s c.f. Neil Bush and Silverado Bank).

In the end the people who will pay for the disappearing equity is the bank customers and WorldCom employees, while there will only be some short term pain for the banks, the stock and bond holders of the banks and WorldCom, and the executives. Government regulation of the market through encorporation and bankruptcy laws ensures this.

Re:Making out like bandits

[Zathrus]

Maybe.

Except that a lot of their contracts defaulted when they restated their earnings. MCI/WC has (had) a lot of government contracts. Governments require things of their contractors, like statements indicating how solid their finances are. As part of the contract.

MCI/Worldcom restated their earnings. They sent letters of notice to all contract holders (e.g. - governmental organizations, on local, state, and federal levels) regarding this. I know at least one major contract that got thrown back to bidding stage because of this (City of Atlanta), and I suspect it's sufficient for any other government to claim breach of contract.

On top of that Chapter 11 isn't a walk in the park. MCI/WC needs money, and needs it in a bad way. Writing off the debt doesn't entirely help here, they still need a cash infusion. They'll be able to find a lender now, but at rather nasty rates. And they'll have a hard time swinging favorable deals with suppliers - few will be willing to extend them credit for 30, 60, or 90 days and are much more likely to say "you want that switch? Well sure. Where's the cash? Upfront. Thank you." Businesses rely upon relatively long turnaround on bills, because they often have to extend credit to their customers -- do you pay your long distance bill upfront, or do you pay it 30 days after the billing cycle? Uh huh.

Chapter 11 will help a lot

[enota]

Worldcom is certainly not out of the game. Chapter 11 is designed to simply eliminate debt. A bit of consolidation here, some layoffs there , and I do believe that they will emerge from this ok. Too bad for the employees though, they are the ones that will get the shaft.

Re:Chapter 11 will help a lot

[Edmund Blackadder]

1. chapter 11 does not generally eliminate debt, although it does screw over the creditors quite a bit.

2. most companies never pull out of chapter 11.

Corporate greed and consumer trust and confidence

[AxelTorvalds]

Is everybody doing it?

I've been wondering about this a lot lately. I've worked at a number of places, been a fully paid regular type employee at IBM for about 5 years, a medium sized company for 2 years and a startup for about a year now. I've seen how things work at those companies and a number of their partners. I've seen a number of sleezy people in business but I've also seen my fair share of honest people and I can't imagine that there weren't whistle blowers.

All things being equal, and they are usually pretty fair. You have AAnderson cooking books at a number of places. Most of those places get audits by KPNG, Price Waterhouse, and others. Likewise you have AAnderson doing the audits at places those other firms account for. How can other accounting firms compete with a company that cooks the books with out also doing so? They audit their work and they should know because they have clients of their own and should have a good feeling for the state of the economy. I've been really amped on the stock market a long time, I've made some buck in it, lost some, for the most part done really well but I don't know how you can trust anybody now.

I can't believe that it's sleezy business becuase if it was just sleezy business then someone more sleezy would rat them out for blackmail or political reasons. Or someone honest would say something. I can't believe that top notch accounting firms would lie for each other and I don't see how they can compete against one firm that is turning losing companies in to profitable ones. Then I see W's response (twice the stay at the federal country club) plus all the politicians are benefitting from it in the first place.

The only thing that makes any sense to me is that lot's of companies are doing crooked accounting, everybody knows it and that's why there aren't any whistle blowers and that a couple more slow quarters than they are expecting is all it could take to wipe out a 100 year old company because they hide the losses and run out of hiding places.

I'm rambling a little but I look on the smaller scale and there have been a handful of the new small linux companies that have burned out in fireball and then people showed up at work with padlocks on the doors, and people were shocked.. The things that happend at Loki are the same types of things happening at WorldCom or Qwest, just on a smaller scale. The telcos are also pretty much a fail proof business if you're not expecting endless radical growth, you will have endless customers and cash flow, it's not a really risky business to run a long distance high speed network, people need that service. Has business come to this?

Re:Corporate greed and consumer trust and confiden

[Guppy06]

Consumer trust? When the heck has that ever had anything to do with anything? If you notice all the headlines screaming "stock" this and "accounting" that, the people that really carry import here are the investors. Most large corporations care for their consumers exactly as much as their investors care for their consumers (and guess what happens if it's more profitable to screw consumers over), because the investors are where the real money comes from. Why do you think they fudged their accounting books to begin with?

Re:Corporate greed and consumer trust and confiden

[puppet10]

The problem also lies with the investors - the little and big ones (the big ones the most, pension funds and other institutional investors own about 45% of public companies) - started seeing the stock market as a big time casino game and rewarding quick profits rather than the fundamental value of the company and its business model.

Business

[_Sprocket_]

I'd like to offer two observations.

First, whenever some story having to do with an IT company, its business practices, and ethics appears on Slashdot its almost a given there will be at least one post that can be summerized as "they're a business - they've got to make money!" It seems the entire point is that ethics has no place when profit is anywhere near the conversation. Now - I would shrug it off as a troll if it weren't for the fact that its consistant and I've met the same attitude when dealing with marketing business units (obviously outside of Slashdot).

Secondly, I used to work for a somewhat small telecom company. Actually - I worked for the ISP that had been bought out by the telecom company. It was a strange experience. As upper management slowly killed all the ISP side's business, we began to wonder where the hell they were making their money. There was an off-shore betting operation that used our satalite links - could be mob or drug money. There was the calling cards targeted at South American immigrants - but even when they played fast and loose with exactly how much actual phone call you got for your money, we weren't quite sure what the profit level was (but I was darned glad nobody knew where our operations center was - in the early days of the cards, the ISP side would field overflow call volume and I couldn't believe the number of pissed off people... one of which read off a p.o. box location and said he was heading there with a gun). So if these few successes weren't the major income, where the hell was the money coming from? It wasn't from the ISP's dwindling customer base. Then it was all clear.

Management announced another dog-and-pony show. We were to get everything prepared for a new gaggle of investors who would tour the facility. One of the business types gushed about how one of our illustrious execs had come from somewhere high in the old WorldCom foodchain and has been attracting investors who wanted to get in on the next WorldCom-like rising star. That would apparently be us. Our income - investors.

It seems our entire business plan was to attract investment dollars. Then puff up to look like a much bigger fish than we were. Hopefully, a much larger fish would see us, decide we were all fat and tasty-looking, and swallow us whole. Everyone would make huge profits. Step Three was almost a certainty.

I was amazed every day that I showed up for work and the front door wasn't closed with a chain and padlock.

A quote from my wife....

[Newer Guy]

"I'm glad. It coundn't happen to a bigger bunch of assholes. MCI treated me like shit until I told them to pound sand and went with Sprint." Speaking of Sprint....I wonder how glad THEY are taht their merger with Worldcom broke apart last year?

Re:A quote from my wife....

[Dalroth]

Hear Hear!

My previous employer was a small consulting agency/ISP in Ohio, is still in business today and was doing quite well last time I checked.

Their clients were rather large companies in the local city, and we often provided T1, frame relay, ISDN and 56k access to these corportations. Needless to say, with that kind of clientel you needed a pretty ph4t pipe.

Now, here is where my memory gets a little hazy. I believe our T1 lines were through MCI, although Ameritech (as usual) handled all the physical wiring. It's possible MCI was the frame relay (c'mon, it's been 3 years), but regardless MCI provided a significan portion of our necessary bandwidth.

And then the bills started coming. They started mischarging us about $5000/month extra. My boss, of course, refused to pay that portion of the bill. A few months, many nasty arguments over the phone, threats by us to sue and threats by MCI (this was just before they became C&W) to shut off our access later, they finally fixed our bill. Only to start doing it again.

Last I remember we were in the market for either dropping MCI completely or joining a class action against them. I'm not aware of the final outcome as I graduated from College and moved to Chicago (a quick traceroute to their servers shows no uunet or worldcom hops. C&W hops used to dominate the traceroutes).

This wasn't just us. On of our clients said that he suspected they were receiving the same billing problems as us, but they just paid their bill and didn't worry about it. Can you imagine how much money MCI would have been pocketing by misbilling customers like that? Imagine the customers who didn't notice, or just paid the bill like our one client! It's sick when you think about it.

That was 3 years ago. I could only hope that with all the mergers and acquisitions these problems had been improved upon over time.

Yet, something tells me they haven't! I wonder what that is. ;)

I won't miss them.

Bryan

It was the fraud, not the clueless business plan

[Zeinfeld]

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

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

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

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

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

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

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

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

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

[kadehje]

The last paragraph parent post makes what I interpret to be an indirect shot at the current president's economic policies. While this may or may not be the intent of the post, the mindset that I have mentioned is common enough in media reports and ordinary conversation that I feel the need to rant about how I believe President Bush is getting the shaft for a problem he is not primarily responsible for creating.

I can't stand how many people claim that the political blame behind the Enron, WorldCom, and other fradulent companies' downfalls is solely that of President George W. Bush. I find that charge to be along the lines of claiming that Bush's foreign policy failures were the chief reason for last September's terrorist attacks.

As with the terror attacks, there were many causes for the ongoing meltdown of the United States capital market. The factors leading to the sudden bankruptcies of these large companies existed long before the current president moved into the White House, and some existed even before his father lived there. Most important among the causes: the executives themselves that lied about the state of their companies. In at least the Adelphia and WorldCom scenarios, it is pretty clear that blatantly criminal acts took place: they falsely claimed profitability to obtained credit from banks that would not have loaned them money if the banks knew that these companies were in fact losing money hand over fist. These executives should be jailed for AT LEAST 10 years (if they knew that these acts were ruining the company for their own personal benefit, then I would like to see them jailed for life) in addition to making as complete a restitution as possible for bondholders and stockholders.

In addition, the incentives behind this lying about companies' financial statemets has been around since the 1980's, when the "Greed is Good" mantra began to sweep Wall Street. Both in the 1980's (until October 1987) and in the 1990's the booming stock market encouraged companies to do whatever was necessary to boost their stock price. Also, especially in the 90s, the ridiculous growth of executive pay, primarily in the form of stock and stock options, gave executives a personal incentive to boost their share prices as soon as possible. Boards of directors, who also largely paid themselves in stock, turned their backs on their obstensible duties to protect shareholders' long-term interests to bolster their own short-term interests.

There were many economists who railed against these conflicts of interest and urged the SEC and Congress to pass new regulations regarding the nature of executive pay and how publicly traded companies were to be governed. But, with the economy appearing to continue to grow robustly, the federal government saw no need to rock the boat. Hell, stock prices grew substantially for 16 of the 18 years between 1982 and 1999 (IIRC, 87 and 90 were the only two down years for the Dow Jones average in that time), so The Market couldn't be wrong, right?

Presidents Reagan and Clinton essentially got a free pass for the way they allegedly handled the economy. All they really did was continue the charade of passing off a modestly growing economy as a tremendously growing economy and let their successors worry about it when it comes to reconcile Wall Street's figures with Main Street's. In addition to coming in at the end of a business cycle, both Bushes suffered tremendous external shocks that hurt the U.S. economy: the Iraqi invasion of Kuwait in 1990 that caused oil prices to double plagued the first Bush's economy; the hijackings gave the current economy a significant body blow. Neither President can be accurately blamed for these problems.

Am I claiming that the current president or his father is infallible? Absolutely not. But using him as a scapegoat for problems that have infected the entire public and private sectors does a disservice to the president and leads to the political squabbling that will slow down the necessary reforms to the economy. The older Bush was in office for four years; Reagan and Clinton lived in the White House for eight years. GWB has barely been in office for 18 months. Which presidents do you think have had the biggest opportunity to influence economic policy since 1981? And another thing to keep in mind: before he can act, the president often needs the consent of another government body -- Congress.

Before pointing the finger at anyone or anything for a problem like today's business fiascos, one must realize that it's not that simple. If there were one cause, then it would have already been dealt with and confidence would already be on its way back into our stock markets. Our entire financial system needs to be tweaked; if one person or group ends up taking the blame for an entire economy's faults, it will end up being an injustice to everyone in the United States.

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

[Zeinfeld]

I can't stand how many people claim that the political blame behind the Enron, WorldCom, and other fradulent companies' downfalls is solely that of President George W. Bush. I find that charge to be along the lines of claiming that Bush's foreign policy failures were the chief reason for last September's terrorist attacks.

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

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

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

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

[PD]

RE: problem not responsible for creating

You are quite correct in that most problems that affect the country are not the fault of the President.

However, our kiss ass politicians see fit to run on platforms such as "family values", "drug-free america", or "jobs for everybody". Obviously, these are feel good platforms. If two lesbians get married, nobody is going to blame a Republican president for a failure of his adminstration's family values policy. If Bob at the factory gets busted for smoking pot on his lunch break, the finger will NOT be pointed at the adminstration's drug free America policy. Politicians can gain but never lose by such posturing.

So, I don't feel a bit bad that someone is pointing the finger at a politician. He promised us good times, thinking that nobody would hold him accountable for bad times. Nobody is saying that he's the ONLY one responsible. But as the current President he's got to explain the actions of the government. He can't say "it's not my fault" because that's just an excuse. All that matters is how he fixes the problem.

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

[G-funk]

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

I thought bush got into the whitehouse by counting votes the way many of the businesses are being run?

Re:

[account_deleted]

Comment removed based on user account deletion

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

[Zeinfeld]

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

You asked 'how is this a negative' when really what you are trying to ask is 'how is this his fault'.

The worldcom affair is not Bush's fault, however it is a negative because:

1. Make Bush CEO of USA Inc was his principal campaign theme

2. Bush is implicated in corrupt share deallings the full details of the SEC enquiry have yet to be released, but it is already apparent that Bush had signed a lockup agreement promising not to sell the shares at the time he sold. If Bush knew that the share sale that had caused the lockup had had to be cancelled because of the state of the company he was trading on insider information.

3. Chenney and White The VP and the secretary of state for the army are implicated in major corruption scandals.

4. Bush's hypocrisy a day after failling to accept responsibility for his own actions the president takes it upon himself to call on CEOs to do just that.

5. Fuzzy math was used to justify the Tax cut. The books at Enron and Worldcom were not cooked to half the extent that Bush and Co cooked the budget to get the Tax Cut for his rich friends through.

6. The corrupt corporations were run by Republicans with strong links to senior republicans Kenneth Lay was famously a friend of GWB and lent his corporate jet for his campaign. Worldcom was run by Bernie Ebbers who was one of Trent Lott's principal campaign contributors.

So yes, while Worldcom is not the fault of the President it makes people a lot more aware of his shortcommings and is therefore quite justifiably a negative for him.

Re:The fraud started before Bush

[Zeinfeld]

There do seem to be a lot of Anonymous Cowards out tonight. Couldn't be that the GOP Internet damage control squad that was boasted about during the election is operating again?

Enron, Worldcom, Tyco, Xerox, all started cooking their books when Clinton was President. They got caught at it when Bush was President.

They may have started to cook the books at Enron while Clinton was President, but there can be little doubt that the largest frauds were carried out during the manipulation of the California energy markets which the Bush administration did nothing to stop, even though the state of California was being defrauded of tens of billions.

So now you want to blame Bush for criminals that started their crimes during the Clinton administration, but were not indicted or prosecuted by the Clinton administration?

I think we can and should blame him for the ones he made VP and secretary of state for the Army,

I think we can and should call him to account for his involvement in an identical scam at Harken Oil.

They are not going under

[alen]

They are doing a debt for equity swap. In english, they are issuing more shares of stock in exchange for the retirement of some debt. This will result in less interest payments, ability to pay off the rest of the debt and have free cash flow to keep the company going. People should read the article. The reason for chapter 11 is for the debt to equity swap to take place, the company has to be legally under bankruptcy protection.

The Bright Side

[Reality Master 101]

Obviously we would all prefer that these things never happened, but it's actually GOOD that they happen once in a while. The reason? It's proof that the system works.

What would be worse than the current system is to have corruption take root and never get cured, generation after generation. I'm sure everyone can find innumerable examples of this in the world.

This probably isn't the end of it; I'm sure more scandals will come to light before it's through. But given the fact that corruption WILL take root whenever you have people, it's good to know that these things are self correcting eventually.

Re:The Bright Side

[Reality Master 101]

The cancer is probably a good thing! Once the chemo cleans out all the bad cells, I'll be healthier than ever!

That's not a valid comparison, because Cancer is not a normal part of living. Corruption is a normal part of society.

A better analogy is that for a healthy body to function, you have to take a dump every now and then to expend the bad stuff your body filters out. Now, if you suddenly stop having to take a dump, are you going to congratulate yourself for having perfect health?

Rumors of Sharks

[_Sprocket_]

I've heard some rumors recently of various groups getting their warchests assembled. Apparently there's some tasty capacity to be had once all that ugly debt gets stripped away. Just when you thought it was safe and the consolidation cycle was over [queue music].

The Achilles-heel of capitalism...

[SwedishChef]

is the requirement for growth. It's easy for a manager to panic over a zero-growth quarter because cash-flow isn't as important as growth. Even small business people are stampeded into making bad decisions because their business isn't growing. Never mind that they have cash-flow, it's the growth they think they need.

In large corporations a new manager will be under the gun to produce more than the last manager. When there is no more growth to be had, then they are forced to invent it. Hence the accounting scandals.

We will see further examples of this problem as companies look to foreign markets for sales growth and to foreign production to reduce expenses. And, when those fail, to accounting tricks to make it look like they've succeeded.

YES! Four for four!

[rjh]

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

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

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

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

Score: four for four.

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

Re:YES! Four for four!

[Kredal]

Note to self: Don't hire rjh.

Re:YES! Four for four!

[BJH]

Please, go get a job at Microsoft.

Re:YES! Four for four!

[nizo]

Where do you work now, and are they publically traded so I can short their stock?

Should the analysts have spotted this?

[train42]

My question to a friend in the financial sector was if stock analysts have enough information to spot troubled companies like Worldcom. He said that the analyst he sits next to has been yelling since last november to get out of Worldcom stock. The biggest red flag apparently was the huge loans to the CEO. When you are looking to buy stock wouldn't it be nice to see a ranking of how many warning signs exist in the company?

MCI/Worldcom is hiring

[HomeGroove]

At least according to the sign at their telemarketer call center in Newport News, VA. The sign used to say something like, "Hiring bonus, $180." Now it just says "Apply now." So rest asured, /.'ers. You'll still get those annoying telemarker calls at dinner time.

Good news for the net...

[vandan]

It's about time WorldCon (current spelling intended) crashed and burned.
They're service is the worst I have dealt with.
They openly support spammers, saying they are 'legitimate business users'.
And they have no morals. Typical western-style corporation.
Crash & Burn, baby!

Debtor-in-possession? Maybe not

[Animats]

Everybody seems to be assuming that this will be a debtor-in-possession Chapter 11 bankruptcy, where the existing management retains control. That may not happen, because fraud is involved. See 11 USC 1104 [findlaw.com], "Appointment of Trustee or Examiner":

• (a) At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of a trustee - (1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause...

Fraud, check. Dishonesty, check. Incompetence, check. Gross mismanagement, check. There's certainly cause for the court to order the appointment of a trustee and kick out the current management.

Official WorldCom bankruptcy site

[Animats]

WorldCom now has an official bankruptcy site. [worldcom.com] So far, there's nothing there but happy talk press releases.

Re:Now is the time ot buy the stock

[Kredal]

1000 shares for 90 bucks... why not? It's not like the stock value can really go down very much. (:

Re:Now is the time ot buy the stock

[rob_from_ca]

Until it's at zero, it can always go lower...:-)

Re:Now is the time ot buy the stock

[Kredal]

Sure, it dropped 30% from when he bought it. I have the same risk (it could go down to 6 cents) but I'd still only be out 30 bucks. OK, so I don't buy the next big game or 2 CDs or something... I can risk that.

Re:Now is the time ot buy the stock

[AntiNorm]

I know a guy that bought $1000 worth of worldcomm stock a while back, it's now only worth $700.

Assuming that he paid around $50 per share (when WorldCom was doing good, its stock peaked over $60), that means he got 20 shares. Since WorldCom stock is worth nine cents a share now, that means that this guy's stock is worth less than two bucks now.

<Nelson> HA-HA! </Nelson>

Wrong.

[Ars-Fartsica]

WorldCom can still "go away". The government doesn't care who owns the network as long as it is operational. Don't confuse the two.

Re:Wrong.

[ergo98]

if worldcom bellys up, how will the next owners of the network handle it?

People have always said that Microsoft wanted to own the Internet...

Re:Now is the time ot buy the stock

[eyepeepackets]

Yeah, for suckers and fools. P/Es are still very high, especially for tech stocks; there is no accountability on the corporate side because there are no real penalties on the legal side; there is no credibility on the part of the government with Mr. Bush as president ("I'm gonna run government like it's a business!" and they surely have tried.); Democrats aren't going to change much either because they're all owned by the same corporations as Mr. Bush and company.

Face the facts: We, as a nation, have seen our national governance (and states as well) sold to corporations by our elected leaders and representatives. We've been sold out for a bunch of dollars, which are now tanking too.

Gonna be a sucky next few years. Shit, I don't even feel good about having my money in a bank any more (they too own a shitload of these corporations.)

Re:Now is the time ot buy the stock

[yintercept]

The tech stocks killed themselves with the mantra of reinvesting 100% of profits. Traditionally stocks would pay dividends or buyback shares. With tech stocks reinvesting 110% of profits, you couldn't tell which companies were making it, and which were covering operating expenses with investor capital. It even made investors fall for gullible schemes like branding. The other nasty thing about reinvesting 100% of profits is that eventually you become the victim of the law of diminishing returns. Happens in every industry. Restaurants and stores often go under when they expand with the assumption that demand will always follow supply.

Who do they owe money to?

[Goonie]

The article mentions some pension funds that bought bonds, but no idea of how the debts are proportioned. Anyone know?

Re:Who do they owe money to?

[Goonie]

OK, that's useful information, but who are the secured creditors?

Re:Too much debt..

[stripes]

WorldCom has close to $30B of debt. The interest payments alone are huge.

Sort of. If they court lets WCOM go into chap 11 the debt is all susspended, along with any pre-chap 11 bills of any kind. To re-emerge from chap-11 they have to show that they are no longer losing money each month, and that they have a "repayment" plan worked out with their creditors. The repayment plan is normally some variant of "screw you, for ever $1 we owed you you get $0.03 and one share of stock...ha ha ha!".

In other words chap 11 basically lets you strip off all the debt (or a huge percentage of it). It also lets you out of any long term contracts (to buy or sell!) that you didn't like, makes it easier to fire people. Oh, and they can "un lease" a building by taking all their stuff out of it and saying "no, were are not paying" to the landlord.

So "too much debt" is no longer WCOMs problem. It is the problem of banks that loaned money, and supplyers that sent goods on purchase orders.

Now I have a theory that the little telco's going bankrupt forced prices down (the little telcos suddonly had "free" infrastructure!) which screwed the medim size ones...and so on. Not just the bankruptcy of corse, it was mostly the drop of the "dot coms", but still I think the bankruptcy laws do have a bit of a chain reaction type thing.

Re:Too much debt..

[King Babar]

In other words chap 11 basically lets you strip off all the debt (or a huge percentage of it). It also lets you out of any long term contracts (to buy or sell!) that you didn't like, makes it easier to fire people. Oh, and they can "un lease" a building by taking all their stuff out of it and saying "no, were are not paying" to the landlord.

So "too much debt" is no longer WCOMs problem. It is the problem of banks that loaned money, and supplyers that sent goods on purchase orders.

Companies operating under chapter 11 do enjoy many interesting abilities, but the key aspect of the filing is the re-organization plan, which has to be agreed to by the creditors. This is not always an easy thing to arrange, and at some point creditors (as a group or individually) are allowed to fill their own plans for the reorganization, or request outright liquidation of the firm (chapter 7). Furthermore, Worldcom is or will soon be operating under debtor-in-possession (DIP) financing, which might also place severe restrictions on what they will be allowed to do. This is *not* going to be pleasant for anybody, especially Worldcom. The story at this point is that the company thinks they can use debt service savings to repay the banks (who are first in line) and get the bondholders to take equity, but if I'm a bondholder in this deal, I think I would have to insist that they cancel the existing common stock at the very least, which I curiously have *not* seen mentioned yet. And it's not clear that the bondholders could not do better in an outright liquidation scenario. Plus, there is the amusing prospect of serious litigation and criminal proceedings throughtout... I really don't see how this could go as quickly as the current leadership at Worldcom thinks it will, but maybe they really do have all their ducks lined up this time. We shall see.

Re:Saw this on coming.

[uncoveror]

As part of their restructuring, Worldcom is going to start paying it's employees in company script, [uncoveror.com] which will only have value in the company store.

Re:Saw this on coming.

[Edmund Blackadder]

you talk about companies like they have their own mind and will.

the executives are the ones that make the decicions and they made out pretty well.

Re:Two relevent Salon comics...

[macdaddy357]

Worldcom, Enron, and all of this mess are direct results of the deregulation from Newt Gingrich, and the Republican Party's Contract with America. "Let's get government off of business' back, and watch the economy soar!" they said. No one opposed them. They put all the watch dogs to sleep, and look what they did when left to their devices! Government needs to do more then just be on business' back. It needs to knock business down face first, and stand on it's neck.

Actually Playboy is looking for Worldcom and...

[christopherjs]

Anderson employees...

CNN.com - Playboy focuses on WorldCom, Andersen [cnn.com]

Re:Fuck..

[gmhowell]

Instead of going back, just hit reload. The browser (either IE or Mozilla, I've done it on both) says something about wanting to REPOST form data. Say ok.

Re:Penny Stocks

[Kredal]

You've already made $1.10! Congrats! Where are you gonna spend your new fortune? hehe..

(See waaaaay towards the bottom (20th ish post for my purchase of 1000 shares)