Here is an interesting quote from WorldCom’s 2001 Annual Report:
If AA noticed some irregularities, they should not have certified the annual report. Their FUCKING JOB is to check the accounting and make sure it is ok. How the hell else are the shareholders expected to judge the relative value of a company if they can’t trust the books? That’s the only reason these firms have work in the first place! Goddamn, this crap makes me mad, AA has proven itself to be nothing more than a sham of an accounting firm, they deserve to fall apart and go bankrupt, and I hope to hell that they do.
IzzyR thanks for the clarification, I guess this thing may be the proverbial straw that broke the camel’s back. On its own, it isn’t the worst thing in the world, but coupled with everything else, it may bring them down.
Kinda touched on above. The problem is that these companies are so dang leveraged that the bankers own the company. Used to be bondholders, but so much debt has been bank financed. What happens is that if there is a crisis of confidence, then your credit lines evaporate. Since these companies have been depending on bank loans to fund their business, suddenly they have a cash crunch and can’t meet their obligations. Capitalism in action and they go bankrupt with a lot of collateral damage. Just ask someone that happens to own a telecom stock in China, which should have no correlation with Worldcom but gets hammered today. Fuck you very much worldcom
I just got off the phone with my financial adviser. I think the poor guy thought I was calling to fire him - WorldCom was my largest individual stock holding (most of my money is in mutuals, so I’m not going to lose a fortune). But hey, what should he have done before advising me to buy their stock - look over the books himself and interview the auditors and the CFO?
Actually my father, VP of a smaller CPA firm believes that the Enron and WorldCom scandals are going to hurt the CPA profession as a whole, even the smaller guys. Distrust abound…
I’m very sorry to hear this. (What was your average purchase price?)
I know my father put some money into WCOM bonds. His rationale was that since the company might go bankrupt he was afraid to invest in the stock. But he figured that in the event of a bankruptcy the bondholders would end up owning the company - a profitable company. So that by buying the bonds at a heavy discount he was getting a good return and was protected on the downside. I’m not sure if this assumption still holds now that in turns out that the company was really losing money all along. A lot depends on whether they were losing money net of interest payments - it might yet turn out that the creditors will take over a debt free company that might turn out to be profitable yet.
See, I switched from MCI to my local carrier back in January, and they’ve been billing me for this $2.17 they claim I owe (while I claim they owe me about $10).
This affair does not come as any surprise to the city instutions, I’ll bet.
Ever since Enron I’ve noticed a string of tv finacial pundits saying that there were runours of a giant scandal in Corporate USA.
For the past fortnight at least the BBC’s morning financial reporter has been dropping extremely heavy hints something serious was amiss, and my feeling is that this is not the last either, because those hints have always been in the plural.
It’s easy to dismiss these folk as doomseers in the wake of ENRON but the tone has been very much more objective and rational than that.
I want the suits in the slammer. Now, if possible. I want the total and ruthless confiscation of every single stinkin’ dime they got. I want a special committee to select a qualified Special Prosecutor (Wellstone, Chomsky, Nader…that seems fair).
I want them to start in Texas, and with Phil Gramm. Does it strike anyone else as odd that Ol’ Phil, tireless champion of the rich and brave palladin of de-regulation… Ol’ Phil has decided to turn his back on the perks and privilges of Foggy Bottom and return to his goat farm?
And the innocent wives and children? Will they be driven from thier homes into the snows of Aspen? Why, no, of course not. They will be afforded the same comforts and support that would be extended to the wives and children of Joe Bob Bubba, or Rachim Hajirra Washington, or Jose Diego y Vida Loca, when they transgress. What better way to expose them to the vigor and exhiliration that comes with bootstrap lifting! What better education in the wondrous and mysterious workings of the Invisible Finger!
I can just hear Our Leader’s conversation with Kenny Boy…
“Well, now, Kenny B…Mr. Lay…Is that spelled L…A…Y…? Oh, calm down, I’m just funnin’ you. Stop that blubbering. it ain’t all that bad! Just think of it as a very very secure gated community. I mean, Leavenworth is actually a fort, idn’t it? Gonna be full of guys your own age, with similar backgrounds. Hell, you’ll know half of them from fundraising dinners…”
A couple of people have touched on the 30 billion debt service as a strong reason that many think MCI WorldCom will go under. Another that I’ve seen cited is their failure in their merger bid with SprintPCS. WorldCom was thought up as a scheme to profit from the deregulation of telecom. It grew over the years via aggressive mergers (think of it as a giant Pacman), gobbling up smaller companies on the way. This was abetted in part by their accounting practices. When the merger failed (all dressed up and nowhere to grow) a lot of money fled the stock.
I’m not sure if I agree with the assertion that the WorldCom fraud pales in comparison besides Enron. It seems to me that the Enron case was a more complex fraud - that they were merely on the cutting edge of creativity in a world of creative accounting. You can envision someone convincing themself that what they were doing was legal, if extraordinarily clever. The WorldCom fraud seems like a clear-cut out-and-out fraud.
I have no sympathy for these guys, but there may be Constitutional issues with this approach. You know, due process and all.
But what the fuck is going on in the Enron investigation? I understand these things take time, but they got AA taken care of, and I’ll be damn pissed if they are the only fall guys. Maybe we should get someone like Elliot Spitzer in Ashcroft’s office. And we’d get to see the bare tit of Justice once more as well.
Hey rjung- I am waiting for some right-wingers to remind us what a wonderful idea it would for us to allow Social Security funds to be invested in firms like WorldCom, Enron, Adelphia. . .
(What was your average purchase price?)
