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WorldCom Fraud Doubles

michael posted more than 11 years ago | from the jail-jail-jail-jail-jail-jail-jail dept.

The Almighty Buck 640

Silvaran writes "No, this isn't a repeat story. WorldCom claims another $3.3 billion accounting error. That's about $7 billion, for those that are counting. Wish I had that kind of cash to miscalculate on my income tax forms." There's also a NYT story. I love how the news outlets are saying, "error", "irregularity", "problem", as if this was all some sort of tragic accident, instead of laying out the obvious truth, "criminal fraud committed with full knowledge it was a crime".

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640 comments

fp (-1, Offtopic)

Anonymous Coward | more than 11 years ago | (#4038308)

irst-fay ost-pay!

fp (-1, Offtopic)

Penis Bird Guy (204613) | more than 11 years ago | (#4038309)

etc etc

Dammit (4, Funny)

TheDick (453572) | more than 11 years ago | (#4038317)

At this rate, I'll never be able to unload this stock.

My biggest feat at night? That the same thing is going to happen to the telecommunications company where *I* work.

Fuck.

Re:Dammit (1)

alan_d_post (120619) | more than 11 years ago | (#4038332)

That's principle, not principal . . . .

Re:Dammit (1)

micromoog (206608) | more than 11 years ago | (#4038475)

Not to mention a woman's love, not a women's love . . .

Re:Dammit (I did work at WorldCom) (0)

Anonymous Coward | more than 11 years ago | (#4038345)

It does not suprise me at all. In 1999/2000 they would not pay bills for things like video cards and keyboards.

When a "billion" dollar company can buy a mouse, there is a problem.

what about the people who told us to buy it (0)

Anonymous Coward | more than 11 years ago | (#4038432)

in the first place?

Like the clowns at MerrillLynched, EdwardJones, and the rest? They had access to financials not available to the general public. These stock brokerage firms new all along what was happening, and they unloaded their positions on their customers. No prosecution for them, eh?

I'll never pay for investment advice again. Now when I trade, it's a minimal cos,t discount, online brokerage.

F 'em.

$3 billion "error"? (0)

Anonymous Coward | more than 11 years ago | (#4038321)

"Aww crap, I forgot to carry the 1!"

Or maybe the batteries were low in the calculator? Ohhh, I know! Cosmic rays caused the calculator to malfunction! Ohh, ohhh! Background radioactive decay from the case caused the accounting package to "loose" $3billion!

See? Its just an honest mistake. Could have happened to anyone...

Alternative explanations (2)

bunyip (17018) | more than 11 years ago | (#4038360)

1. Used a Pentium to do the calculations

2. Used Excel to do the calculations

I think other posters have already mentioned that they never seem to make mistakes the other way round.

"Oh, crap, we forgot to carry the 1 when we added up the revenue, now we made an extra billion last year. Shit - we'd better give all the regular line employees a pay raise before our headquarters collapses under the weight of all the extra cash"

Like that would ever happen......

It's all relative (0)

Hudjakov (552632) | more than 11 years ago | (#4038322)

The life is not much different when you have $100000000 or $200000000.

Careful what you wish for (0)

Anonymous Coward | more than 11 years ago | (#4038323)

Wish I had that kind of cash to miscalculate on my income tax forms

I'm sure the IRS wouldn't mind if you overestimated your income by $7 billion. Well, they might mind if you couldn't pay the taxes on that.

Hey Michael (3, Insightful)

Anonymous Coward | more than 11 years ago | (#4038325)

I love how the news outlets are saying, "error", "irregularity", "problem",

Those just happen to be the industry terms. The accounting has terms just like the computer industry. And considering that WorldCom executives are being arrested, it is pretty obvious that fraud is involved also. Just another slashdot editor adding his two cents to a post instead of just posting it.

Re:Hey Michael (1)

Monkius (3888) | more than 11 years ago | (#4038380)

I wonder if it is logical to describe "errors" on this scale in such euphemistic terms?

Re:Hey Michael (0)

Anonymous Coward | more than 11 years ago | (#4038504)

It's just the way things are. It likes trying to distinquish between a crash and a catastrophic system failure. The correct term is accounting irregularities which means that they don't jive with Generally Accepted Accounting Standards (GAAP). The slang phrase for it is cooking the books and anybody who has ever taken an accounting class in college should recognize that phrase from the video they show you. It is almost as ubitiquous as the "blood on the highway" series for driver's ed.

Re:Hey Michael (1)

hplasm (576983) | more than 11 years ago | (#4038440)

And workplace dress codes make you dress up like these crooks to look "professional". Seems to me the new 'Corporate look' will be pajamas with arrows on them. B'stards.

Slavery (0, Offtopic)

smagruder (207953) | more than 11 years ago | (#4038461)

Anyone who dresses as a hollow corporate clone is a SLAVE. People should begin emancipating themselves from the corporate mindset.

Re:Slavery (0)

Anonymous Coward | more than 11 years ago | (#4038487)

And live with their mother until their 45 at which point their mother will kick him out because it is hindering her sex life.

Fight the corporations from the inside. I let them pay me to do almost nothing everyday and in the process convince them that I am so invaluable that they need to continually raises. So far it has worked for over 4 1/2 years!

Re:Hey Michael (1)

devnull17 (592326) | more than 11 years ago | (#4038455)

It's no different than the way that the media always refer to those awaiting trial as alleged criminals. To do otherwise is libel.

Re:Hey Michael (0)

Anonymous Coward | more than 11 years ago | (#4038498)

"Those just happen to be the industry terms."

Come on! The industry committing the crimes are whose terms you refer to, of course they're gonna use the kindest and gentlest words. but it's not the industry writing the news stories, it's the fucking press!

miscalculations (1)

rattler14 (459782) | more than 11 years ago | (#4038326)

yeah, the problem with the higher ups at companies like WorldCom is that it's too hard to count numbers as high as 3.3 billion with only 10 fingers.

perhaps they should fire up their good ole XP systems and use the calculator

Re:miscalculations (2)

ThePilgrim (456341) | more than 11 years ago | (#4038419)

You could be right
This story at The Register [theregister.co.uk] says that there could be a $50b hole in their accounts because of overestermating the value of their investments
This makes a $5b hole look like peanuts

Re:miscalculations (1)

hplasm (576983) | more than 11 years ago | (#4038459)

...perhaps they should fire up their good ole XP systems and use the calculator

Now that would give them a plausible excuse...

Loose change (5, Funny)

jhughes (85890) | more than 11 years ago | (#4038327)

They 'found' three billion dollars that was missing?

Where do you lose three billion dollars? I wanna see the size of that couch they're finding all this loose change in...

Re:Loose change (0)

Anonymous Coward | more than 11 years ago | (#4038336)

I wanna see the size of that couch they're finding all this loose change in...

I want to turn it upside down and shake it! Ohh, $2.5billion in quarters!

Re:Loose change (1)

mtrupe (156137) | more than 11 years ago | (#4038361)

It was Gallagher's couch.

Re:Loose change (4, Funny)

Jugalator (259273) | more than 11 years ago | (#4038393)

I wanna see the size of that couch

Sir, your wish is my command, sir!

*looking*

Sir, I couldn't find the largest couch in the world, but this [milanobedding.co.uk] is claimed to be the largest sofa bed in the world, sir!

Re:Loose change (1)

Lawrence_Bird (67278) | more than 11 years ago | (#4038414)

All the 'frauds' have involved the incorrect accounting for expenses and debt reserves. Previously we heard how they capitalized (ie wrote down over a long time) expenses that were operating in nature and should have gone all in the same year. Now we are hearing that they were taking money out of the bad debt reserves and counting it as income. Thats not bad as long as the debts are no longer bad, but apparently they still were.

Re:Loose change (0)

Anonymous Coward | more than 11 years ago | (#4038516)

6billion....
So did this company ever make any money?

I don't understand (0)

BigGreen03 (532234) | more than 11 years ago | (#4038328)

Don't the shareholders get to appoint the major players in these companies? Don't they consider conduct and ethics? What kind of position are these big-wigs in that it becomes so tempting for them to steal billions of dollars, aren't they already making 6 to 7 figure salaries? GOOD LORD, Money isn't everything!

Re:I don't understand (1)

mtrupe (156137) | more than 11 years ago | (#4038346)

Money *IS* everything to these guys- obviously. Its the same attitude that got them into their executive position that causes them to cook the books to get just a little (or a lot) more money.

Maybe you should read the article... (3, Insightful)

xbrownx (459399) | more than 11 years ago | (#4038356)

..and every other article about the Worldcom fiasco.

They didn't steal or imbezzle money from the company. The defrauded investors by overstating their earnings, which made the company look better, which made the stock price go up, which made their portfolios hit the tens of millions of dollars mark.

Stealing is stealing (4, Insightful)

pieterh (196118) | more than 11 years ago | (#4038384)

Falsifying the company's worth on paper in order to raise the share price in order to boost the value of one's own stock options is theft.
But it's hardly a surprise considering the environment in which WorldCom and similar companies grew and selected their executives. The solutions are also fairly obvious and include things like paying executives with shares not options, and obliging them to hold their shares. The boom years selected the most agressive, most dishonest, and greediest executives. Today's tough business environment will kill off companies run like pyramid scams. The sooner the better, IMHO.

Don'tcha just love (0, Interesting)

Anonymous Coward | more than 11 years ago | (#4038331)

I love how the news outlets are saying, "error", "irregularity", "problem"

...and I love it how someone who knows how to write a perl script thinks he knows dick about accounting or finance.

Finance "for the rest of us" (5, Insightful)

dachshund (300733) | more than 11 years ago | (#4038368)

and I love it how someone who knows how to write a perl script thinks he knows dick about accounting or finance.

I think it's that kind of attitude that leads to these problems in the first place. "Oh, you're an ordinary person, you wouldn't understand the financial intricacies that led us to accidentally misstate our earnings in a way that just happened to be massively beneficial to us at the time..."

It's the same stupid attitude taken by laymen and PHBs towards computer folks that lets companies get away with putting out flawed and poorly tested software and then say it such glitches are to be expected.

Re:Finance "for the rest of us" (3, Insightful)

Tads (460911) | more than 11 years ago | (#4038433)


I agree. I did three years of economics in school before doing computer science at uni and the ideas behind economic theory don't change all that rapidly (if at all). The Money section of the newspaper might seem pretty cryptic but its all simple theories explained with todays buzz words - kind of like computing to the uninitiated. Spend a bit of time learning and its quickly understood.

Kind of line - learning to write perl scripts :)

I guess your attitude means you daren't criticise the government or any of the laws it passes - after all, you aren't a lawyer and you probably have never worked as a politiciam ...

The log in your own eye and all that.

D.

Re:Finance "for the rest of us" (2)

smagruder (207953) | more than 11 years ago | (#4038448)

Amen. I'm sick of PHB Bastards making us crap-code for expediency, rather than actually doing design and the whole proper development process. It's high time for a strong programmers' guild!!

Isn't it odd... (5, Insightful)

Andy_R (114137) | more than 11 years ago | (#4038333)

...that you never hear of any accounting 'errors' that make the company look less wealthy than it is?

Re:Isn't it odd... (3, Informative)

Anonymous Coward | more than 11 years ago | (#4038365)

You do often see this - in the accounts sent to the Tax Authorities. There is a whole bunch of accounting theory around Transfer Pricing that does exactly this.

Tom

Re:Isn't it odd... (5, Insightful)

pieterh (196118) | more than 11 years ago | (#4038401)

Uh... this is what accounting is mostly about, AFAIK. Reduce the profits, pay less tax. It's most amusing to see the opposite happening. "Uh, we've successfully raised our tax bill by $1Bn..." This could only happen in a world where a company's worth is trivialised into something as meaningless as 'profit' in order to pump up shares way beyond their real value.

Re:Isn't it odd... (2, Informative)

cjkarr (23970) | more than 11 years ago | (#4038422)

Wrong. Microsoft was recently investigated by the SEC for understating its revenues. They understated how much money that they were making in order to save it for bad quarters. If that's not making a company look less wealthy, I don't know what is. It's essentially the inverse of what Enron / Worldcom did.

There's currently an article on kuro5hin that is working its way out of the queue that describes what 'you never hear about'.

-Chris

Re:Isn't it odd... (1)

Hittite Creosote (535397) | more than 11 years ago | (#4038499)

You see it all the time whenever a declaration of wealth would cost the company. So sports teams are barely breaking even (so no payrise to the players), few films ever make their money back (what, you took a share of the profit), and no Mister taxman, we didn't make a profit this year...

Keep it UP...US government! (1, Insightful)

PinkBird (317418) | more than 11 years ago | (#4038338)

At this rate and with all the companies they are investigating, the government is going to single handily destroy the US economy. Sure some company's are lying about their books...but let's look at the governmental books and see how many places we can find fraud there!!

Re:Keep it UP...US government! (2, Interesting)

Anonymous Coward | more than 11 years ago | (#4038378)

Trustworthy accounting is the BACKBONE of the economy. If investors are not sure they can trust the books of the companies, then they will not invest, companies will not grow, the economy will flounder. The private sector *needs* the government to perform this function. Because the government has failed in its duty to ensure that fraud was not being committed we are now seeing an increased likelihood of a double-dip recession because investors are wary of Who's Next.

I love you free-market people spouting off about how evil the government is, when it's too much free in the market that has the US economy in trouble.

Re:Keep it UP...US government! (2, Insightful)

mtrupe (156137) | more than 11 years ago | (#4038409)


Uhh... The US economy is not in trouble, its in a recession. They happen. Then things level out and growth occurs, again.

This is why the US has BILLIONS to give to nations crippled by socialism and communism. This is why any time there is a problem in the Middle East, the World looks to the US.

Its not like the US is going to fold because of this. Its freedom in our market that has led to all the most important inventions of the past 100 years.

I know, you hope the free market and capitalism folds, but its just not gonna happen. Sorry.

Re:Keep it UP...US government! (2)

smagruder (207953) | more than 11 years ago | (#4038382)

While we're at it, let's decentralize both the national government *and* fat, monopolistic corporations. Too much waste and economic torture on both accounts!

Re:Keep it UP...US government! (2, Interesting)

Anonymous Coward | more than 11 years ago | (#4038412)

So what your saying is that the government should turn a blind eye? That would be like saying ignore murders to bring down the offical murder rate. Ignoring it may help you now, but in the medium to long term you're going to end up fsk'd. Who do you suggest investigate the companies, Anderson consulting?

The whole point of private enterprise is that it's meant to be more efficient than public enterprise hence governments being corrupt and inefficient is a given. The problem with the US is that where business ends and where government begines is blured.

Re:Keep it UP...US government! (2, Informative)

Hittite Creosote (535397) | more than 11 years ago | (#4038513)

The South Korean government started cracking down on their notoriously corrupt companies some time ago. Compare their overall stock market performance to that of the US recently. You'll wish you'd had your money in Seoul...

A politician once said (2, Funny)

ch-chuck (9622) | more than 11 years ago | (#4038339)

"A billion here, a billion there - pretty soon it adds up to real money" - one site attributes that to Everett Dirksen

And on top of that few billion... (5, Interesting)

killthiskid (197397) | more than 11 years ago | (#4038341)

WorldCom also said that when the earnings are restated, it would most likely take a write-off of as much as $50.6 billion related to the reduced value of past acquisitions.

So theres another $50.6 billion down the hole, too.


What I don't get about telecom, esp. the telecom in my area, QWest, is how the hell they are rolling in money. My phone bill is outrageous... and they have a monopoly in the region. I know they're getting at least $40 out of every person with a phone in the midwest... where the hell does all that money go?


Re:And on top of that few billion... (2)

killthiskid (197397) | more than 11 years ago | (#4038353)

Ack! Should be 'aren't rolling in money...'


Sigh, coffee please...

Re:And on top of that few billion... (1)

bastion_xx (233612) | more than 11 years ago | (#4038383)

Ack! Should be 'aren't rolling in money...'

No, you had it correct. But they should have been using $1 bills instead of $100's as rolling papers. Result is the same though....

Re:And on top of that few billion... (1)

Lawrence_Bird (67278) | more than 11 years ago | (#4038394)

most of what makes our phone bills so offensive can be traced back to the Federal government, ie FCC, Al Gore, etc. Take a look at all the taxes and surcharges, add them up and find out what % of your phone bill they are. On mine they are 40%.

Re:And on top of that few billion... (2)

killthiskid (197397) | more than 11 years ago | (#4038467)

That's hilarious! How can you possibly equate the taxes & surcharges on a phone bill with Gore? Seriously, draw me a line. I want to know if you just bashing and full of crap or if you really have some line of 'proof'...

Re:And on top of that few billion... (1)

dachshund (300733) | more than 11 years ago | (#4038486)

What I don't get about telecom, esp. the telecom in my area, QWest, is how the hell they are rolling in money

In the case of QWest, I think it has something to do with all the fancy fiber-optic cable they laid back in the 90s. The monopoly portion of the company (local) is just keeping the long-distance and data parts afloat.

Re:And on top of that few billion... (2)

JaredOfEuropa (526365) | more than 11 years ago | (#4038501)

If they're anything like the Telco's over here, the money goes to:
- acquisitions of bollocksy and overpriced companies
- purchase of outrageously overpriced broadcast licenses for GSM frequencies. Which is just a hidden tax by the government, with which the politicians done a grand job looking good to the taxpayer ("look at all that extra money I got for you people!"), and at the same time stifling the development of the next generation GSM networks by making sure none of the telco's have any money left.
- Taxes.

Plus, keeping a network going costs a lot.

3.3 Billion ? (2, Insightful)

shayera (518168) | more than 11 years ago | (#4038342)

As in 3,300,000,000 $'s, bucks credits ?

You know, I've heard about calculating errors, but
3.3 bill, is not a calculation eror, thats darn gross negligence at beast, villanous stupidity at slightly worse, and punishable by long term jail at worst..
There are countries that make less money than that on their national budgets.

I sit here, and the only way I can react to this is with a slightly disbelieving laugh.. It's so far out it's almost funny in a slight Twilight Zoney way.

Re:3.3 Billion ? (1)

alan_d_post (120619) | more than 11 years ago | (#4038396)

thats darn gross negligence at beast, villanous stupidity at slightly worse, and punishable by long term jail at worst

These folks never get long jail terms. Long jail terms are reserved for people who do things like sell grow lamps.

Notice how Neil Bush, Charles Hurwitz, etc. got away with crazy stuff in the 80s S&L scandal?

Though I suppose at this point the administration might decide to make an example out of one of the Enron or WorldCom guys.

Enjoy your free market, folks! Look how wonderfully it works!

Will Uncle Sam step in? (1)

seosamh (158550) | more than 11 years ago | (#4038343)

It's going to be interesting to see if/how the US Govt steps in to support WorldCom customers if this finally takes WC down. They do carry a lot of internet traffic.

It seems to me like... (-1, Offtopic)

Anonymous Coward | more than 11 years ago | (#4038352)

Bin Laden shouldn't have bothered launching a terrorist attack against the US, it was already rotting away itself this badly with the corrupt CEOs - who managed to get two of their kind into the White House, IMNSHO. And now war-taunts against Hussein. Sure Hussein isn't loved by a lot of people, but if Bush attacks, there'd be more people out there showing their hatred of "US meddling".

War on Terror? The terrorist have won. We now live in terror - everyday. Someone forgets a briefcase in an airport, watch as the airport gets evacuated and shut down for 6 hours. And no vendetta by Bush is going to end that terror.

Offtopic, it sure as hell is..

And of course, (5, Insightful)

Fat Casper (260409) | more than 11 years ago | (#4038357)

No actual people were responsible for committing actual crimes.

The justice department needs to stop being a bunch of whores and realize that "limited liability" has to do with financial, not criminal liability. Fraud is fraud, theft is theft. Put them in the same cell with a guy doing 5 years for forging a check. It makes me sick.

accounting irregularity (2, Insightful)

leebrownusa (598293) | more than 11 years ago | (#4038366)

The spin by the media is guided by the principle that you are innocent until proven guilty. Thus the "nice" choice of words for the WorldCom bastards who are responsible for this "alleged" fraud.

Handling by Justice Department (5, Informative)

OaITw (155633) | more than 11 years ago | (#4038367)

Worldcom's CFO is already in jail awaiting trial and the company is going bankrupt. The hotest story I am hearing on the streets here in DC is the fact that no one from Enron is in jail yet. This will increasingly stink up the Bush administration since his staff has so many Enron ties. Enron was Ashcroft's largest campaign supporter. Congress passed laws making rules tougher for future wrongdoers but it is not clear to me that the rules needed to be made stronger. Imclone, Worldcom and Adelphia C?Os are already in jail under current laws. Why haven't the laws been applied to anyone at Enron?

Re:Handling by Justice Department (1)

Lawrence_Bird (67278) | more than 11 years ago | (#4038387)

Enron gave a boatload of money to anybody who would take it. The Dems stink too.

Re:Handling by Justice Department (2)

Pxtl (151020) | more than 11 years ago | (#4038500)

This is different - we're not just talking "Enron threw money at them" this is more like "people have investments in Enron stock, have friends who work in high up positions at Enron, and are scratching each other's backs".

Why Enron Execs Aren't In Jail Yet (5, Informative)

grendelkhan (168481) | more than 11 years ago | (#4038453)

While Dubya may be a doofus, he at least knows how to put his finger to the wind, much like his old man did, in the past he was leaning off his buddy Ken, but now that the winds have shifted, Kenny and company are just waiting in the on deck circle.

What I've been reading about the whole Enron thing, it's not a matter of figuring out who the bad guys are, but unravelling everything enough to have a clear picture to take to a grand jury. The "accounting practices" of WorldCom, Global Crossing, Adelphia, etc. are pretty blatant. Enron takes this to a whole new level.

Imagine a 4500 machine network wired by a pack of monkeys hopped up crack, crystal meth, and mescaline, and you'll have a pretty good idea of how convoluted the shell game that Enron was running was. Ken Lay and his boys are going down, it's just going to take awhile to untangle the wiring.

Not that Dubya wouldn't cover for him if he could, but that would be total political suicide.

Re:Handling by Justice Department (1)

Saeger (456549) | more than 11 years ago | (#4038496)

...no one from Enron is in jail yet.

That's because oil is slicker than shit.

--

Re:Handling by Justice Department (2, Informative)

mtrupe (156137) | more than 11 years ago | (#4038497)

Do some research-
Its not just the Bush administration that Enron was tied to. It was the Clinton administration as well. Numerous Senate DEMOCRATS have ties to Enron as well.

The Bush/Enron crap is just a smear campaign. It works too, because people like you don't care to look at facts.

Re:Handling by Justice Department (0)

Anonymous Coward | more than 11 years ago | (#4038518)

The Bush/Enron crap is just a smear campaign. It works too, because people like you don't care to look at facts. It didn't help when Bush tried to duck out of admitting his friendship with Ken Lay. The best way to make shit stick to you, is to try to avoid it.

Best Punishment (1, Flamebait)

smagruder (207953) | more than 11 years ago | (#4038369)

I wish Ebbers could get the death penalty for perpretrating this heinous economic crime. When considering all the lives and livelihoods trashed, he deserves worse than death.

Spin doctoring (5, Interesting)

zevans (101778) | more than 11 years ago | (#4038370)

Maybe the American press are skirting the issue - but the British press certainly aren't: try
The Guardian [guardian.co.uk] ("fraud" appears 5 times) and The Times [timesonline.co.uk] which even uses the word "scam".

Zack

25 of 29 biggest telecom companies will go bye-bye (0, Interesting)

scum-e-bag (211846) | more than 11 years ago | (#4038371)

I heard on the radio just last week...that there was a guy who worked at a New York investment research firm (they emphasized that he was NOT a broker/analyst), who said in a newspaper column (I think in the NYTimes) that 25 of the 29 largest telecom/photonics companies in the US were at risk of going bankrupt in the next coming months. He compared it to the early 20th century when there were over 50 car manufacturers in the US, and then after a major car industry meltdown, there were 5 companies which emerged from the dust.

This guy predicted that 25 of the largest telco companies will go down (and this 25 included Nortel, but that's the only name I remember), and NO ONE will rescue them at all, because the only way the other 4-5 companies will have a chance of a healthy life afterwards is if they let the companies go bankrupt (R.I.P.) while the 4-5 remaining companies will buy them up in a fire-sale.

Just wondering if anyone else heard about this prediction...it was just last week I think. I'd also like to get my hands on the article. If anyone knows anything about this, please let me know. I did a bit of Google searching and checked the NYTimes, but didn't find anything. Bad keywords probably.

Re:25 of 29 biggest telecom companies will go bye- (1)

scum-e-bag (211846) | more than 11 years ago | (#4038389)

The question is: Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?

Most certainly, if executives can be satisfied with a couple of hundred tousand dollars a year each instead of tens and hundreds of millions of dollars a year each, and if stock holders can be satisfied with modest but steady returns on their investment. Greed ends up killing all it touches.

I partially agree with your assesment... (1)

cnelzie (451984) | more than 11 years ago | (#4038458)


Although, I must add that in the Auto Industry. The returns on investments remained rather static after that meltdown. Up a few bucks here, down a few bucks there.

Nothing all that major. Of course, now with the globalization thingy, we are seeing a resurgence of the competition that existed prior to the Auto Industry meltdown. Perhaps a few new American companies will be formed in this new era of Automotive competition.

Who knows? At any rate, having a large influx of new designs, ideas and construction (At least new to the American Publix; see The Mini.) We might start seeing a little volatility within the Automotive Market.

Then we can see some stability in the Telco market. That can go on for about 20 to 50 years and then it might flip-flop once more.

-.-

Re:25 of 29 biggest telecom companies will go bye- (0)

Anonymous Coward | more than 11 years ago | (#4038445)

The comparison to the auto industry doesn't work. Back when there were 50 auto companies
there were a lot fewer people in the US and a lot less demand for cars. A shake-out was inevitable.
There would be no need for any of those 25 telecom companies to go broke if they were run properly -- there's plenty of customers and plenty of demand.

What we are seeing with WorldCom, Enron, Tyco, ect. is a recurring pattern. Companies with lots of customers and lots of revenue -- who are going broke. More and more companies are becoming the playthings of the wealthy elite and Wall Street -- existing not to produce goods and services but existing only to enrich a handful of people.

example -- @Home had over 4 million customers paying $45 a month. Do the math. And yet they went broke. Could it be the $6 Billion they blew on a worthless dotcom?

example -- Exodus Communications had $300 million gross revenue in 2000. In 2001 they had $660 million gross revenue -- more than double the previous year -- and filed for Chapter 11 at the end of 2001. Why? Blowing hundred of millions on bad aquisitions.

example -- AT&T hires a new CEO. Fires him less that a year later, citing "a lack of intellectual leadership" as the reason. But gives him a $26 million severance package.

example -- Hewlett-Packard/Compaq -- History shows very clearly that there has never been a merger of this type that has worked out well. Not one. And yet the deal was done anyway because it will enrich the people who engineered the deal. 5 years from now, when Hewlett-Packard is following in the footsteps of WorldCom and Carly Fiorina is fired by the HP board of directors, it won't matter -- she and a few others will have already pocketed their millions and will draw a nice severeance package as a reward for running the company into the ground.

example -- Dozens of companies who are doing poorly, profits are down, even losing money in some cases, but top executives receive large raises and bonuses.

Re:25 of 29 biggest telecom companies will go bye- (1)

scum-e-bag (211846) | more than 11 years ago | (#4038470)

The comparison to the auto industry doesn't work. Back when there were 50 auto companies there were a lot fewer people...

I suggest you look up 'Kondratiev cycle technology'. Jay Forrester (inventor of magnetic-core memory), studied this at MIT/Sloan school and determined that the a long-term economic cycle develops due to the 'self-ordering' nature of capital equipment.

Basically Forrester's group found evidence for the following feedback loop: Early in the deployment of any technology there is a scarcity of capital. Capital equipment is expensive, and early investments involve high degrees of risk accompanied by high profits in a given technology sector. That in turn brings investment in the businesses developing this capital. However, a large part of this capital is used in the development of the capital itself (i.e. IT tends to need advanced hardware and software to develop the bleeding-edge new hardware and software for actual end-use).

Thus the 'buildup phase' of new technology creates a high demand (for both the acutal equipment and the stock of the companies that make it). At some point, however the generation of this new (and expensive) equipment (or software) exceeds the actual (end-user) demand. When this happens the high profit margins that were being realized during the build-up phase disappear quite rapidly, the investment-value follows (crashing stock prices) and the investment money looks for other places. See this article [gold-eagle.com]

Sound familiar? Whether or not you buy into the economic details, this is one of the behaviors seen in economics. The inflated acquisition prices mentioned are the direct result of this effect.

Because sure people make stupid mistakes even (especially?) with billion dollar transactions. But the funny thing about the stock market is that the money doesn't ever go away. Whenever someone loses in the market, someone else has made a profit.

And yes it sucks when the players break the rules but especially on the financial rules the market punishes you very hard. I worked for a biotech firm that was growing well, showing solid net earnings ca $300m on $2b sales, a 30:1 p/e ratio. Our japan division was found to have been moving inventories to the tune of changing the sales #'s by $50m. This lie, accounting for only 2.5% caused a nearly 50% drop in stock price and a (justified) shareholders lawsuit.

Whenever someone fsck's with the rules of the game (fixing the books, insider trading, breaking anti-trust rules, whatever), real people get hurt and we have SEC, IRS etc to try and keep up with the process. MS imo is an excellent example of how a determined and unscrupulous competitor can harm while evading the systems controls(sic).

I'm just thanking my stars that (so far) the politicians havent fscked up like they did after the '29 stock market crash. The US enacted protectionist trade tarrifs which effectively were the first blow in killing off the *world* economy.

Post-sept-11'th fears and RIAA / DMCA idiocies aside, at least across a several bumpy decades our boneheads in Washington, the EU, etc at least so far have managed not to fsck up. They still have opportunities to snatch defeat from the waiting hands of victory, but so far it could be a whole lot worse I think.

Be careful what you wish for.... (2)

suss (158993) | more than 11 years ago | (#4038379)

Wish I had that kind of cash to miscalculate on my income tax forms.

You might not have the cash, Michael, but a slight "miscalculation" like that could find its way onto your tax records... You're talking to a crowd of 31337 hax0r5 here! (Or at least a lot of wannabees)

(Imagine the look on Michael's face next time he gets a letter from the IRS)

Jewish parasites squeeze your life's blood (-1, Troll)

Anonymous Coward | more than 11 years ago | (#4038381)

Not only leaders in corporate fraud, but have you also noticed how the Jews are at the forefront of those trying to restrict our rights. Know your enemy. Study this list of Jews trying to destroy your freedom:
  • Rosen
  • Coble
  • Berman
  • Eisner
  • Redstone
The Jews never create anything. They are the parasites who wedge themselves between the producer and the consumer. The Jew takes a slice of every pie that passes by. What the Jew hates is that the Internet is cutting him off from his host. The artists can now distribute directly to their fans. The Internet has made the Jew irrelevant. So the Jew tries to buy the politician to do his bidding. The Jew tries to get bought politicians to pass bogus regulations in order to maintain Jew hegemony over the consumer.

Listen and learn about the Jew in this mp3 [natvan.com] .

Learn the Truth about the Jew [natvan.com]

System (0)

Hudjakov (552632) | more than 11 years ago | (#4038385)

Maybe there was an 32 bit signed integer owerflow?

Capitalism.... (1)

zaal (29646) | more than 11 years ago | (#4038390)

... is the best we have right now. And it rewards people for this sort of 'miscalculation'. Don't get me wrong; I'm not socialist but there has to be a better way. Isn't there?

Re:Capitalism.... (3, Insightful)

danheskett (178529) | more than 11 years ago | (#4038460)

... is the best we have right now. And it rewards people for this sort of 'miscalculation'. Don't get me wrong; I'm not socialist but there has to be a better way. Isn't there?

You call going to jail, being publically ridiculed, going bankrupt, and generally becoming a laughing stock being "rewarded"?

Yes, in the short-term you might do okay. In the short-term you might profit. But it always comes to get you when the house of cards inexorably falls.

Do nothing. Do absolutely nothing. This is part of the natural rise and fall of corporate capitialism. Bad companies will fail, no matter what type of fraud they employ to cover it up. Good companies prosper, even in bad times.

Re:Capitalism.... (0)

Anonymous Coward | more than 11 years ago | (#4038462)

There is, and it's not a socialist system. The problem is it's not based on greed so will never be accepted.

Besides, how could you possibly even think that the current system in the US is anything less than perfect? I mean the US is a shining beacon for the rest of the world.. or so I'm constantly told that it is by usasins.

Everything counts in large amounts.... (0)

Anonymous Coward | more than 11 years ago | (#4038395)

The important thing to remember is that at this point, there's not much left to lose. WorldCom could announce a $500 billion error--it's not going to shut them down any faster, just make them look worse.

Uffff, we are not alone... (1, Insightful)

Anonymous Coward | more than 11 years ago | (#4038398)

In 1998, when Russia's economy went down the hole every "respectable" politician in America was crying wolf about this. In every corner you could hear about Russia as a robber's paradise. Everyone noted how 1 milliard vanished there, 4,5 evaporated in seconds and how Russia's economy nearly declared bankruptcy.

Yes these problems existed and still exist but then and not long ago everyone talked about the chaotic "uniqueness" of Russia and how such things couldn't happen in... the USA...

Well it gives some kind of confort to see that we are not so unique at all...

Re:Uffff, we are not alone... (2, Insightful)

mtrupe (156137) | more than 11 years ago | (#4038457)

Its obvious you have not been on this Earth very long. The economy does not always grow at incredible rates like it did in the late 90's. Recessions happen. Corporate corruption happens too - hopefully those responsible are punished.

This is hardly comparable to the fall of the Soviet Union.

Whoops... (4, Insightful)

Beautyon (214567) | more than 11 years ago | (#4038400)

the obvious truth, "criminal fraud committed with full knowledge it was a crime".

We call this Libel / Slander.

Re:Whoops... (1)

hplasm (576983) | more than 11 years ago | (#4038514)

Everyone else calls it "Truth".

News flash (3, Funny)

yeoua (86835) | more than 11 years ago | (#4038406)

I can just see it now...

"
Top Story of the day! Today WorldCom states that indeed, it has never earned a profit at all, explaining that what they had previously thought was only an error of about $7 billion, actually was much more.

'Apparently after some more thorough investigation, not only has WorldCom never turned a profit, but all figures that could have been called profit were in personal bank accounts in the Swiss. We found that 90% of all documents pertaining to the company were also forged... leading us to believe that the very existance of WorldCom maybe fraudulent,' explains an investigator.

Another investigator merely states, 'It's just a front used to collect money. Now they owe everyone everything that they've ever taken in.'
"

Re:News flash (1)

rde (17364) | more than 11 years ago | (#4038476)

all figures that could have been called profit were in personal bank accounts in the Swiss

Damn. That's a hell of a hiding place. When they said that the money was disappearing down a hole, I guess they meant up a hole.

Vested Interest (2, Insightful)

BooRadley (3956) | more than 11 years ago | (#4038418)

I love how the news outlets are saying, "error", "irregularity", "problem", as if this was all some sort of tragic accident, instead of laying out the obvious truth, "criminal fraud committed with full knowledge it was a crime".

The reason for this might be that news outlets are small parts of much larger companies, who also happen to be vulnerable to the rise and fall of the market. If you take a look at any of your major news sources, you will find that they are also fully-owned subsidiaries of large megacorps. Controlling the spin on the stock market in general is in the best interest of those who are directly affected by the public's confidence in investing in corporate stock.

For the most part, corporate news has long since quietly renounced its role as public watchdog, and is now little more than a marketing arm for its new masters.

33 Bucks! (2, Funny)

ThulsaDoom (574868) | more than 11 years ago | (#4038425)

The IRS threatened to CASTRATE me for misscalcuating 33 bucks on my Mass. income taxes. Apparently though if your a full time accountant for Worldcom you can let 3.3 BILLION slide for 3 years!!!?!?!?!? wtf?

There should be a law ! (1)

Actarus (549857) | more than 11 years ago | (#4038427)

These fraudulent practices are just making every investor cringe and become hesitant to invest in the market. There should be a law against any act which deliberately causes injury to the reputation of Wall Street and makes the general population lose confidence in the system. Laws against frauds are obviously not enough. We already have defamation [abbottlaw.com] laws for damaging an individual's reputation... However, the impact of these acts (Enron, Worldcom, others to follow) will be felt by millions for years and nothing will prevent other financial giants from doing the same in the future. A new law could simply be an extra deterrent.

A year ago, if you had invested 1000$ in beer you would have more money returning the bottles today than if you bought Enron Stocks then and sold them today.

Re:There should be a law ! (2)

danheskett (178529) | more than 11 years ago | (#4038438)

Riiiight.

Just one more law, that's all I need man. Just give me one more law, and that will stop this crap, I mean, damn man, just one more law.

You sound like a junkie looking for his fix, man.

I tell you what: you draft up a law that could stop this type of crap, and I'll listen. But the fact is that you can't draft up a law that would have prevented Enron/WorldCom/etc etc.

Crooks are crooks. One more silly law isn't going to stop them from swiping billions or doing dozens of billions in damages.

Re:There should be a law ! (1)

wolfen (12255) | more than 11 years ago | (#4038503)

A year ago, if you had invested 1000$ in beer you would have more money returning the bottles today than if you bought Enron Stocks then and sold them today.

Of course, if you'd bought $1000 worth of Budweiser's stock you'd be doing even better...

Re:There should be a law ! (1)

Tads (460911) | more than 11 years ago | (#4038508)


I think the whole point is that these companies don't care about laws. Making new laws is not going to change this, its just more rules to evade, fudge, or just plain ignore.

How many times do companies do things that are truly reprehensible, that hurt people or damage society etc and then say 'its not personal, its just business'.

The upshot is - business doesn't care about people. It also doesn't care about the economy further than how the economy impacts its operation. Business will do anything they want to do when it comes to selling product and ensuring those sales. Lock down your market, patent generic ideas, indoctrinate your buyers, stamp on the competition.

Its just business :)

Yay for living in the 00's.

D.

"The Clinton, Miss.-based company ..." (3, Funny)

sdo1 (213835) | more than 11 years ago | (#4038428)

Worldcom is based in Mississippi? Well why didn't they just say so.

The missing money? It's buried in mason jars out behind the shed. Sheesh.

-S

biggest telecom companies will go bye-bye (0, Redundant)

SkipToMyLou (595608) | more than 11 years ago | (#4038463)

I heard on the radio just last week...that there was a guy who worked at a New York investment research firm (they emphasized that he was NOT a broker/analyst), who said in a newspaper column (I think in the NYTimes) that 25 of the 29 largest telecom/photonics companies in the US were at risk of going bankrupt in the next coming months. He compared it to the early 20th century when there were over 50 car manufacturers in the US, and then after a major car industry meltdown, there were 5 companies which emerged from the dust.

This guy predicted that 25 of the largest telco companies will go down (and this 25 included Nortel, but that's the only name I remember), and NO ONE will rescue them at all, because the only way the other 4-5 companies will have a chance of a healthy life afterwards is if they let the companies go bankrupt (R.I.P.) while the 4-5 remaining companies will buy them up in a fire-sale.

Just wondering if anyone else heard about this prediction...it was just last week I think. I'd also like to get my hands on the article. If anyone knows anything about this, please let me know. I did a bit of Google searching and checked the NYTimes, but didn't find anything. Bad keywords probably.

My favorite replies from Worldcom execs. (2)

AppyPappy (64817) | more than 11 years ago | (#4038466)

Let he who is without sin..


I defy anyone to come in here and deny they ever miscounted change.


I realize that $3.3 billion sounds like a lot to the average person..


You have to remember that we aren't talking about REAL money here


I did not have fraud with that corporation.

No Government Bailout In Sight (4, Insightful)

scum-e-bag (211846) | more than 11 years ago | (#4038484)

About forty years ago, it looked like Lockheed was going to go bankrupt. The stock fell from $60 to $3, which was below par (i.e. breaking up the company and selling off the assets would have recovered more money than the stock was selling for). The problem was that Lockheed wasn't just a defense contractor, it was the defense contractor, and during the height of the cold war, to boot. They couldn't be allowed to go bankrupt.

So the government bailed them out.

Then, some years later, there was a little problem at a generating plant owned by General Public Utilities (GPU). You might not have heard of GPU but you've heard of the plant: Three Mile Island. GPU stock took a hit, as you might imagine. In fact it looked like it might go broke. The problem was that it was a utility, which means it was a monopoly. If it went broke the lights went out over a fair stretch of countryside. That couldn't happen.

So the government bailed them out.

Now, my father saw both of those coming. He bought Lockheed stock at fire-sale prices because he knew that they couldn't be allowed to go broke. He cried because he couldn't afford more. He made out like a bandit.

When GPU started to go under, he bought all the GPU stock he could. And this time, he could afford more. He made out like a bandit. So well, in fact, that he assured himself a comfortable retirement. He's quite conservative, and told me ruefully, "I always preached the values of thrift and economy. Now I'm comfortable in my old age, but it isn't due to any of that. Hmph."

Then the Seattle public utility, through a boring series of blunders, started to go broke. They couldn't be allowed to go broke, for the same reasons that GPU couldn't and Lockheed couldn't.

So the government...said "Hey! Wait just a darn minute here!" And didn't bail them out.

And they went broke. And the lights stayed on.

Ditto when California started having rolling blackouts. Big raspberries from the Fed, because the Shrub knows California wouldn't vote for him if he was rolling out the red carpet in front of Jesus Christ for the Second Coming. Much stick-waving, stunningly bad contracting, and shouting, but the lights came back on and stayed that way.

The days of government bailouts are over.

If they had upgraded (2, Funny)

NorthDude (560769) | more than 11 years ago | (#4038489)

their old pentium,
they would never had such errors' ;-)

I swear your honnor! I only rounded to the nearest decimal!

its FAR WORSE! Add 50 billion of fraud "Good Will" (0)

Anonymous Coward | more than 11 years ago | (#4038512)

its FAR WORSE! Add 50 billion of fraud "Good Will" on the books. This nbrings the tally to 57.75 billion.

This article neglects to refer to the fact that the AP press release mentioned that its not just 7 billion dollars missing from the accounts.... a full 50 BILLION is going to be written off immediately in a couple weeks as reevaluated Good Will assets that were not material but nevertheless padded their worth.

The total can run higher than that by the way.

But the total reachable in just a couple weeks can soar to 57.75 billion!

====

AP Business Writer
Thursday, August 8, 2002; 8:15 PM

NEW YORK -- Bankrupt telecommunications firm
WorldCom Inc. said Thursday it uncovered another $3.3
billion in bogus accounting, adding to the $3.85 billion
fraud it revealed in June.

The fraudulent accounting already revealed occurred in
2001 and the first half of 2002. The additional fraud
would bring the total of phony accounting at WorldCom
to some $7 billion.

WorldCom also said it will likely write off $50.6 billion
in goodwill and other intangible assets, too.

====

57.75 billion missing!!!!

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