WorldComNews.com

Media Archive
July 1-7
Some Headlines and Commentary Provided By Ben Silverman and DotComScoop.com

Sunday July 7, 2002 @ 3:51 PM EDT
We've already said goodbye... Senate Majority Leader Tom Daschle ripped into SEC Chairman Harvey Pitt on CBS' "Face The Nation" this morning. "I have to say that at this point, we could do a lot better than Harvey Pitt in that position today. That cozy permissive relationship has to end and he in large measure has orchestrated that over the last 18 months," Daschle said. A spokesperson for President Bush said Pitt is doing a good job, despite evidence that he's not.
Silence, something about silence makes me sick. WorldCom's silence will end on Monday when key executives, past and present, head to Capitol Hill. I've been told that CNBC, CSPAN TV and CSPAN Radio will all broadcast some or all of the proceedings.
Oops, we did it again. The Senate Permanent Subcommittee on Investigations has concluded that Enron's Board of Directors ignored evidence that should have tipped them off to accounting problems at the energy trading firm. Time Magazine broke the story.
Talk about bad luck; Lucy Woods is head of WorldCom International and a non-executive director at the Royal Mint, the British firm that prints the U.K.'s money and is under investigation as well.
A profile of Internet pioneer Vincent Cerf, who just happens to be a Senior Vice-President for WorldCom.
The mixed-up, whacky world of telecom and its' victims: 500,000 job cuts in the past 18 months, 53 public telecom companies filed for bankruptcy since the beginning of 2001, and book keeping and deal swaps that would make anyone dizzy. Good connecting-the-dots piece about the telecom sectors woes.

Saturday July 6, 2002 @ 1:12 PM EDT
Just another Manic Monday... WorldCom will take center stage on Monday in Washington, D.C. as top executives, past and present, tell the tale of a company crumbled. Monday's testimony will undoubtedly give President Bush some ideas for his speech on Corporate America, set for Tuesday.
Follow the money... Executives at web-hosting firm Digex, which WorldCom acquired last year, have been given millions in loans to stay with the company. WorldCom's former CFO Scott Sullivan was a Digex Board member and approved the loans. Digex fired its CEO two weeks before WorldCom's initial disclosure of accounting problems. No reason was given.
Cynthia Cooper, a WorldCom auditor turned whistleblower, is the latest in a string of squealers that just happen to be women. "Do we have a trend here, or merely a freakish coincidence? Are women somehow the fairer sex when it comes to wrongdoing in high places? Do the actions of Cooper -- not to mention Karen Silkwood, Anita Hill, Erin Brockovich or Linda Tripp -- suggest that, in the end, it takes a woman to hang out the dirty laundry? Paul Farhi of The Washington Post asks.
Cooper is being praised in her hometown of Clinton, MS; home to WorldCom as well. "She has what this country needs more of, and that's integrity," Cooper's high school English teacher told The Clarion-Ledger.
Only a fashion writer could be so shallow to blame Corporate America's problems on executives lack of taste when it comes to their appearance. Luckily, the Washington Post employs an idiot named Robin Givhan. "But fashion's informality is an apt symbol for the bad accounting, the shady dealings and the wildcatter swaggering," Givhan writes. Perhaps the article was intended to be a tongue-in-cheek piece, but it comes off as lame and this from the author of a previous article entitled "When Khaki Meets Chichi." The timing of this piece is odd because I met a woman last night who is a designer for J. Crew. When I told her I shopped at K-Mart almost exclusively she chuckled and said I was wise to do so. "Fashion is not for the masses," she said. "It's for idiots who can't get laid and have a lot of money to spend." Too bad she has a boyfriend.
If nothing else, my cohorts at The New York Post are the best damn headline writers out there. Magna Cum Fraud reads the headline for a story about SUNY-Oswego, the school that former WorldCom CEO Scott Sullivan attended and the very same school that bestowed a honorary doctorate to former Enron CEO Kenneth Lay in 1999. FYI, in case you didn't know, SUNY stands for State University of New York.

Friday July 5, 2002 @ 9:08 PM EDT
The starting line-ups for Monday's All-Star WorldCom investigation have been announced. The House Committee on Financial Services released its list of seven witnesses that will testify on Monday. They are; former WorldCom CEO Bernard Ebbers, former CFO Scott Sullivan, former Senior Vice President and Controller David Myers, former Senior Global Managing Partner, Technology, Media, and Communications Practice for Andersen Melvin Dick, Salomon Smith Barney telecom analyst Jack Grubman, current CEO John Sidgmore and current Chairman Bert Parks. Dick and Roberts are the only ones who were not subpeonaed (Warning: PDF link). Committee Chairman Michael Ocley (OH) will hit the hit the airwaves beginning Sunday and appear on all three major morning shows on Monday, as well as on CNBC and MSNBC (but he's not scheduled to be onn CNN at anytime, oddly). The hearings will begin at 1:00 PM EDT and there is no word on whether they will be shown live.
Poor Scott Sullivan... after being fired as the CFO of WorldCom his Boca Raton, FL mansion has become a news item. Now he is being sued by WorldCom. The company wants back a $10 million bonus it paid him last year saying that his accounting dirty work breached his contract and he's not eligible for the bonus. Word of advice Scott... just return it now.

Friday July 5, 2002 @ 4:04 PM EDT
Want to know how it feels to be laid off from WorldCom? A recently pink slipped employee forwarded me the following letter the s/he sent to WorldCom CEO John Sidgmore. The author's name has been removed to protect his/her privacy:
John:
As a now-former WorldCom employee, I'd like to ask you, as CEO, to do the right thing for the employees laid off on 6/28/02:
Pay the severance in a lump sum, as has been the procedure with all prior such actions.
I realize the company is managing cash very carefully. I know that making this choice may cause WorldCom to expend over $150M. But I believe that this is the right course of action for a number of reasons:
- With a potential for bankruptcy, WorldCom would be unable to make the bi-weekly payments of severance to these employees. With the number of employees laid off, this would dwarf the Enron situation. WorldCom does not need additional negative publicity.
- Chat boards and other web-communications are encouraging former employees to contact their congressmen and senators to ensure that this is a question in the upcoming hearings. By making this decision, you will pre-empt that issue entirely.
- The amount of money, while not insignificant, would be a second-quarter charge. It would be something that could be attributed to the actions of prior management, and allow you to have a cleaner slate for the third quarter and thereafter.
- For the employees, the possibility of having little or no severance is a huge concern. I counted on that to help my family during the time it will take me to transition to a new job. Ensuring the payment to these employees, by changing to a lump-sum payout, means that we can move on with our lifes without the stress and worry about whether these payments will be made.
- Each of these employees is a potential public-relations crisis for WorldCom. As the individual stories are told in public, WorldCom's image will be degraded even more. However, making the change to a lumpsum would keep in check such negative publicity.
- You would make current employees more confident about their situation by making this decision; now more than ever, WorldCom needs to improve morale to maintain productivity.
John, I appreciate the difficulty that WorldCom is facing. As an employee of XXXXXXXXX years, and having a finance background, I am probably more aware of the impact of this request than most people. However, it IS in the best interest of WorldCom to do this. The employees put their lifes into WorldCom; it is only right that WorldCom treat these employees appropriately.
Sincerely,
Name removed to protect privacy
IDT outlined its bid for certain WorldCom assets today, including MCI. The deal would be worth about $5 billion when it's all said and done, with the intial payment being about $800 million in IDT stock. "WorldCom has offered no public comment on the bid, though company officials have said privately that it doesn't appear top WorldCom executives are taking it seriously," Dow Jones Newswires reports. IDT Chairman Howard Jonas said that MCI was being shopped by investment banks within the past six months. IDT also offered up a lame press release informing WorldCom customers of their strategic options. It doesn't seem anyone is taking IDT's offer too seriously. The company, in my opinion, jumped the gun on trying to hone in on the assets, a sure sign that if a WorldCom break up occurs, IDT won't be able to outbid companies like BellSouth and Sprint.
WorldCom is essentially giving the finger to Justice Department by continuing its internal investigation into its accounting problems. The DOJ had demanded, er, requested that WorldCom stop its probe so that the company wouldn't interfere with both the DOJ and SEC investigations.
Former Presidential also ran Ralph Nader is calling for a national organization to protect the rights of individual shareholders. Maybe it will be called The Green Party? Get it? Money is green, har, har. Anyway, I wrote about this last year and have privately been pushing shareholder groups involved in various lawsuits against a number of companies to band together.
Scary thought for the day... Chris Matthews, of MSNBC "Hardball" fame, linked to this here website.

Friday July 5, 2002 @ 7:24 AM EDT
The Wall St. Journal reports that WorldCom's largest bondholders are in discussions with the company to exchange debt for equity as a condition of prepackaged bankruptcy. A move such as this would dillute shareholders stake in the company, but would also help ensure a smooth transition in and out of bankruptcy.
The Justice Department has demanded that WorldCom stop its internal investigation so that the Feds can get in first, according to The Wall St. Journal. The DOJ is concerned that WorldCom's own investigation may lead to witness tampering and create problems down the road.
Is Harvey Pitt the right man to clean up Corporate America? The SEC Chairman is a former securities lawyer who has already had to recuse himself from various investigations because they involve former clients. "[Mr. Bush has] got an SEC chair who is so conflicted that we can't possibly be sure he's doing the kind of regulation and reform that we need," complained Lawrence Mitchell, a law professor at George Washington University and author of Corporate Irresponsibility: America's Newest Export, The Globe and Mail reports.
The men behind corporate scandals and the unfinished castles they call home.
Next Monday will be telecom analyst Jack Grubman's coming out party; sort of. The Salomon Smith Barney schill isn't a household name unless you're in the biz or got sucked into to one of the stocks he picked to go through the roof. On July 8, along with WorldCom executives, he'll testify on Capitol Hill. "He took his ideas to Salomon Brothers in 1994 and earned a quick following among many money managers for his negative rating on AT&T in 1995, before the company's stock began to fall. That downgrade became the first weapon for critics who say Grubman merely pumps up the stock of Salomon clients. That's because Grubman changed his tune in November 1999 and issued a positive report on AT&T -- just before Salomon earned big fees as an underwriter when AT&T launched a stock to track its wireless unit," Ben White of The Washington Post writes in a profile on Grubman.
Grubman's analyst pals are calling foul saying they were also duped by the company. "We previously held a positive view on the stock. However, our assumptions were based on falsely reported numbers. Based on [WorldCom's] revelations, we now believe that a bankruptcy filing is highly likely within the next 12 months," one analyst wrote recently.
Cynthia Cooper, a WorldCom auditor who disputes the company's version of events leading the discovery of the accounting scandal, will not testify before a Congressional committee next week. Cooper, along with the head of WorldCom's audit committee, were dropped from the witness list because of fears that their testimony could impact on-going investigations.
Want to know who gets to clean up corporate shit? Look no further than Weil, Gotshal & Manges; a New York-based law firm that is helping Enron, Global Crossing, Adelphia, Pacific Gas & Electric and, yes, WorldCom, restructure their businesses. I've dealt with these guys before on a few stories and they're pretty slick. The firm represented Excite@Home's bondholders who were owed about $750 million by the company when it collapsed late last year.
First comes love, then comes marraige, and then the lawsuits really begin to fly. Lawyers are chasing WorldCom-related ambulances and lining up to get a piece of the company. "I would expect that the WorldCom directors and officers responsible for this deception were heavily insured, and this could be a potential source from which shareholders could get compensation for their huge losses," a Jackson, Mississippi lawyer bringing a suit against the company told the Clarion-Ledger.

Thursday July 4, 2002 @ 1:16 PM EDT

Now it gets interesting... It seems that Scott Sullivan, WorldCom's ousted CFO, tried to delay the internal audit that eventually discovered the company's accounting problems. "People examining the matter say that the effort to defer the audit was part of an effort by Sullivan to explain away bookkeeping practices that he also tried to justify in a June 24 memo he submitted to the board in an 11th-hour effort to save his job," The New York Times reports.

On that same tip, there are now questions surrounding a $2.6 billion line of credit that WorldCom drew upon at the end of May. In order to use the credit, according to The Washington Post, the company's books would have to have been in order. And the company was in the midst of an internal audit when it tapped the credit line. "The precise timing of some events has not been made public. But as multiple investigations into the company unfold, the $2.6 billion loan highlights the importance of when top WorldCom officials knew about its accounting irregularities, which the company has blamed on its now-fired chief financial officer."

WorldCom set a record earlier this week for volume when 1.5 billion shares of its stock traded in one day. So who is buying all this stock? "You're probably looking at a lot of hedge funds, guys who sold short on the way down, and now they're betting on a serous bounce," Michael Boyle, chairman of the Boyle Fund, told CBS MarketWatch. "They're trying to get the stock back up. Who knows what they'll do tomorrow?"

Pennsylvania teachers have lost $69 million on WorldCom stock and bonds.

Don't blame Bernie, say small town residents who also used city funds to buy a monorail (Simpsons' reference).

Mark down March 2003 on your calendar... That's when WorldCom and key executives at the company go to trial on fraud charges.

Shrewd PR or salt in the wounds? Both as AT&T replaces MCI as the sponsor for today's fireworks display on The Mall in D.C.

Wednesday July 3, 2002 @ 5:01 PM EDT

From the "taste of their own medicine" category... leaders of the House Energy and Commerce Committee requested SEC records and a report by July 9 detailing how the commission has "policed" WorldCom, Xerox, Global Crossing, Tyco and Qwest; the worst of the wurst. "[Representatives] Tauzin and Greenwood asked [SEC Chairman] Pitt whether the SEC reviewed any of the five companies' quarterly and annual financial reports from January 1998 until the date when the SEC launched investigations of each company," Reuters reports.

It takes a village to raise a child, but only one idiot to raise the obvious. "Within two years, WorldCom will ultimately end up being owned by someone else," a Gartner analyst said on a conference about WorldCom that was meant to get the firm some press. I don't know, all the stuff the Gartner guys say is pretty basic.

WorldCom's next big problem... Follow the money... it's called overbilling. Good AP article detailing how WorldCom overbilled at least one corporate customer and how it's a standard industry practice that inflates revenue.

WorldCom stock skyrocketed after IDT bid. In other news, it's still worth 22 cents per share. "IDT believes that prompt consideration [of] its proposal by WorldCom would help prevent further loss of customers and deterioration in value of both these business units," IDT said in a statement.

Real Video version of Sidgmore's press conference from yesterday.

Wednesday July 3, 2002 @ 11:43 AM EDT

What would you have done? asks Michael, a WorldCom employee. "Most of you will cry, "I would have exposed it! Right away!". Would you? Could you look someone you cared about in the eye and say that? Could you come home one night and tell your family you've lost your job, even in this market, because of something you chose to do? Most people have a high personal standard of morality, and will say with surety what their actions would be in any morally challenging situation. They seek to do the Right Thing (tm), no matter what the cost. And they honestly believe they would," Michael writes.

Former S.E.C. big nut James Breeden has been appointed by a judge to be WorldCom's monitor, basically making sure the company doesn't shred evidence and payout severance to executives. Breeden beat out former child star Bill Mumy for the job.

Shares of WorldCom stock rose over 140 percent to about 24 cents by 11:30 AM EDT on Wednesday. Volume was heavy and optimism high until everyone realized it was 96 degrees in New York and Wall St. traders were suffering from mass heatstroke.

The South shall rise again... The Observer's Will Hutton blames Southern conservatism on the recent spate of corporate scandals. "The rise of American conservatism has closely followed the rise in the economic fortunes of the Confederacy, together with its belief in a take-no-prisoners form of capitalism. The new Right thinkers provided the intellectual cover, providing populist slogans calling for 'freedom', accusing all forms of government of being 'coercive' and deriding the social contract as a cause of 'dependency'. It didn't take long before Wall Street joined in, insisting that the companies should serve the interests of their owners first and foremost - the doctrine of maximising 'shareholder value' - and that regulation inhibited 'enterprise,'" Hutton writes. In other news, Jefferson Davis has been named to WorldCom's Board of Directors.

WorldCom's Australian customers are being advised to flee. The dingo ate my contract!

Wednesday July 3, 2002 @ 10:16 AM EDT

She's gonna drop a dime on 'em... Federal prosecutors are getting cooperation from Cynthia Cooper, the WorldCom auditor who discovered the company's accounting problems. "The company has claimed that Ms. Cooper uncovered the accounting problems as part of a routine audit. WorldCom also hasn’t disclosed that Ms. Cooper might have encountered resistance in her efforts to make her findings public. Such discrepancies have led investigators to suspect the company has been less than forthcoming in its disclosures," The Wall St. Journal reports.

More bad news for WorldCom employees... there could be more layoffs depending on market conditions, CEO John Sidgmore said yesterday.

Looking to snap up WorldCom's key assets before anyone can blink, IDT said yesterday that it has offered between $5 billion and $6 billion for MCI, MFS Networks and Brooks Fiber. "It is highly unlikely we would consider selling any of our core assets, such as MCI or our local business," WorldCom spokesman Brad Burns said.

Tuesday July 2, 2002 @ 6:50 PM EDT

Facing a possible delisting of its stock, WorldCom has requested a Nasdaq hearing. Tickets to the event are $5 with proceeds going to Dotcom Scoop Beer Fund. Pants are optional.

IDT is expected to announce details of its bids to acquire MFS and MCI at 7:30 PM EDT. Dow Jones reported earlier today that IDT would bid on MCI. To be perfectly blunt, I can't imagine IDT acquiring MCI's business. I would think one of the bigger players in the space would go for it. And quite frankly I'd be afraid that IDT would make some massive staff cuts at MCI. That's just my opinion on the matter. WorldCom reportedly wants $5 billion to $6 billion for MCI, while IDT will only offer around $2 billion. IDT is moving quickly to vulture WorldCom's assets and the first-mover in these cases usually doesn't get what it wants. Keep an eye on them though.

Props to CBS MarketWatch for publishing the transcript of WorldCom CEO John Sidgmore's new conference from earlier today. "About two months ago, I agreed to take over as CEO of WorldCom after the termination of Bernie Ebbers. Even then, we faced significant challenges on the financial side, which we can talk through in whatever level of detail today. But I'll tell you one thing: I never imagined at that point what we really had in store for us. And while the deeds we uncovered were part of the past administration, I want to apologize here today on behalf of everyone at WorldCom," Sidgmore said, passing the buck to former CEO Bernie Ebbers. You know, two months ago I wrote, "Executives at WorldCom are beginning to quietly blame Ebbers for everything that went wrong at the company and they point to the negative press and market reactions of the margin call-bailout loans that Ebbers received. Insiders however say that the company's management and its board should share the blame. Look for the Ebbers' loans and the "general telecom malaise" to become defining factors of the company's public defense."

Tuesday July 2, 2002 @ 5:08 PM EDT

"So far there have been no events of acceleration, no threats of acceleration," WorldCom CEO John Sidgmore said regarding the company's bank lenders repayment schedules.

"We're no WorldCom," says Tyco, the conglomerate whose former CEO is charged with tax evasion for issues not relating to the company.

Smart Money's James B. Stewart says, throw the bumbs in jail. "It's time for some accountability -- which means some prison sentences for high-level corporate wrongdoers," Stewart writes.

Tuesday July 2, 2002 @ 4:38 PM EDT

WorldCom CEO John Sidgmore held a news conference this afternoon, let's take a peak at the reaction thus far... The Associated Press reports that Sidgmore put the load on Bernie, Ebbers that is. ""It was this company that audited our auditors. It was this company that turned ourselves in. ... It is this management team that will take this company forward and restore public confidence," Sidgmore told reporters. "Sidgmore said that despite the huge telecommunications firm’s deteriorating situation, he hoped to avoid bankruptcy. He said WorldCom has about $2 billion in available cash," the AP reports as well.

Reuters reports that Sidgmore had productive talks with S.E.C. Chairman Harvey Pitt this morning. No word on whether there was any spooning.

New York State Comptroller H. Carl McCall filed a motion for the state's pension fund to become the lead plaintiff in a class action lawsuit against WorldCom, some of its officers and Andersen.

Defense Secretary Donald Rumsfield says The Pentagon won't be affected by the WorldCom mess. The U.S. military is one of the company's biggest customers.

Tuesday July 2, 2002 @ 3:13 PM EDT

Sure, WorldCom is a mess, but that doesn't mean the company isn't still operating. Even its MCI unit has been spared of huge job cuts and some of the image problems. The Wall St. Journal recognizes this by giving some nice ink to MCI's The Neighborhood, a wireless-priced landline service that launched in April. "The service, which now operates in 34 states, works just like a cellphone plan. Customers pay a flat fee of between $49.99 and $59.99 a month (depending on the state) for unlimited local and long-distance calls. Also included in the package are six add-on features, from Call Waiting to Voicemail to Caller ID, that typically cost about $5 a month each on other plans," Ryan Chittum of The WSJ reports. The Neighborhood has signed up over 777,000 customers in three months and I'm one of them... well, I'm waiting for the switch to happen. (Thanks to everyone who answered the call and emailed me a link to this article.)

Tuesday July 2, 2002 @ 2:48 PM EDT

Sad... MCI won't sponsor the July 4 celebration on The Mall in D.C. "In light of recent events, MCI and National Park Service mutually agreed to delay any partnership activities," Peter Lucht, a spokesman for WorldCom, told The Washington Post.

I was told there is a nice article about MCI's The Neighborhood service in today's Wall St. Journal. Anyone care to give me the skinny on it (don't have a WSJ account anymore). Email me with details.

Real quick, some non-WorldCom news... EDS to cut 2,000 jobs, company says it has nothing to do with WorldCom... French media and utility conglomerate Vivendi is in the news today; CEO ousted, liquidity concerns, stock halted and then drops on reopen, all kinds of concerns that make Barry Diller look smarter each day... Yahoo! Internet Life magazine will cease publication after its August issue, according to a memo published on Jim Romenesko's Media News. The second memo on that page reveals Dow Jones CEO Peter Kann stepping down from his position as COO of Dow Jones and Publisher of The Wall St. Journal; he'll continue as DJ's Chairman, CEO and editorial director of all DJ publications... Cardinal Health says accounting fears are nonsense, stock begins to recover... More on EDS, Moody's put the firm's credit under review, may downgrade because of WorldCom and general I.T. sector malaise... Amazon.com will reportedly launch an online apparel store, no timetable was given... Adobe, Hewlett-Packard and Sun Microsystems are just some of the companies furloughing workers this week in an effort to conserve cash... No wonder my phone has stopped ringing.

Tuesday July 2, 2002 @ 1:43 PM EDT

The fallout from WorldCom is just beginning. A source close to the situation has informed Dotcom Scoop that Kelly Services, a Troy, MI-based human resources solutions firm, will sever its ties with WorldCom at the close of business today. Kelly, according to the source, supplies about 600 temporary workers to WorldCom. Kelly workers are utilized at WorldCom's Marco Polo program, which provides free Internet content to schools, and elsewhere inside the telecom giant. Since Kelly/WorldCom workers are temps, they'll have to wait for new assignments. Kelly apparently wanted to reassurances that it would be paid in a timely manner, possibly a restructuring of the companies original payment terms. When WorldCom would not budge, the company decided to pull its business and workers.

No word yet on exactly what case John Sidgmore will make for WorldCom's continued existance, but Reuters reports that he will press his case to the media. ""It's not that WorldCom is too big to fail. No company is that important or that invincible. But it's not just a company that makes widgets. It has network links to every major industry and government agency that would be difficult to replicate quickly," an unnamed industry analyst told the wire service.

Tuesday July 2, 2002 @ 12:03 PM EDT

From a WorldCom employee: "Thanks so much for "As The WorldCom Turns." Being an employee there (still), of course, the accounting problems, etc. are disturbing. Nothing is disturbing to me more, however, than the pompous assholes trying to score some political gain from the company's misery. No more government contracts? That sounds fair to me. Get rid of the top brass who are responsible for the scandal and punish the regular folks who remain. That's about right. Compassionate conservativism in action. And do not get me started on Pitt. 3 months of SEC investigations and nothing. Then we confess this accounting "irregularity" and he sues us that very day. Gives us 4 days to respond to a vague inquiry and then slams us all over the media because he didn't care for the response (rather than simply request more information - that might take some work). Politicians trying to make things worse are even worse (I think) than the morons who got us into this mess."

WorldCom CEO John Sidgmore will meet the press at 3:30 PM EDT today. The press conference will take place at the National Press Club.

The imminent collapse of KPN Qwest and WorldCom's troubles have managers of European corporate communications networks scrambling to find suitable carrier. Suitable can also be understood to be mean someone who will be in business for more than a few months.

Wendell Cox says that Amtrak is WorldCom. "Amtrak-WorldCom shows that a double standard operates in Washington. Misreport private financial results and the consequences begin with subpoenas. Misreport public financial results and the rewards begin with photo-opportunities," he writes in The National Review. Cox is on Amtrak's reform board.

WorldCom is making payments to Indian firm VSNL. "VSNL has maintained that it was "in constant touch" with its US- based lawyers and WorldCom to ascertain the outstanding amount to be settled between the two sides," The Hindu reports.

A rundown of politicians and political associations who are returning WorldCom contributions or donating the money to charity.

When greed is good goes wrong. Yes, Gordon Geko gets more ink than most real executives because he epitomizes Corporate America even fifteen years later. "Some experts are worried that unless reforms are made, the stock market won't rise from its bear market levels for a long time, and in fact may fall further," Susan Harrigan writes in Newsday.

Heavy volume, but little movement in the price of WorldCom's stock. It can't go much lower.

Tuesday July 2, 2002 @ 4:33 AM EDT

Don't make me angry... I might actually do my job. S.E.C. Chairman Harvey Pitt ain't buying WorldCom's version of the events that make up its' accounting scandal and discovery of said scandal. Another story on the same subject. And, yet another story on the subject.

For the conspiracy theorists out there... Clifford Alexander, Jr, Chairman of Moody's Investor Services, was on WorldCom's Board of Directors up until January of this year. So why didn't Moody's downgrade WorldCom's bonds to junk until June!?

Love it, love it, love it, love it! Henry Blodget, the former Merrill Lynch Internet analyst who apparently couldn't read an SEC filing or understand a basic business plan, may be criminally charged with securities fraud. Blodget may not be the only one, reports The New York Post. (Kick ass job Jessica)

WorldCom, Enron, Andersen... Guess which company has donated more money to politicians since 1989 than the others.

Cisco Systems and AOL Time Warner are just two companies that may have to revise their accounting principles. I can think of about three-hundred others. A-T&T-choo.

Ned Barnholt, CEO of Agilent, says that CEO's need to come out fighting and say "This is not us." I'm not sure if he's referring to corporate scandals or people who know how to properly run businesses.

Comedy break... WorldCom and Argentina In Talks To Create One Massive Disaster.

How did Andersen miss WorldCom's accounting problems? That's a question the firm seems unwilling or unable to answer.

Over 1.5 billion shares of WorldCom stock exchanged hands on Monday, blowing away the old record of 670 million shares, which WorldCom also held. The Dow Jones Industrial Average, made up of thirty leading stocks including AT&T and SBC, only saw 1.4 billion shares trade hands.

More on the General Services Administration possibly not doing business with WorldCom. The GSA is in charge of handing out government contracts. "The GSA did not have figures available on how much the government paid WorldCom for telecommunications and Internet services last year, but that figure was roughly $2 billion across about six agencies, according to one analyst's estimate," the Washington Post reports.

The S.E.C. is holding an open meeting tomorrow. I think this means you can watch a bunch of suits drink coffee and shoot the shit.

What the hell do you do if you're still holding onto WorldCom stock? The analysts have thrown in the towell... get out.

Bill Virgin of The Seattle Post-Intelligencer (another of my favorite papers) says don't ignore headline risk. "Indeed, headline risk is getting blamed in some quarters for prolonging the bear market by making investors queasy about committing money, out of fear we're about to toss another bucket of fish guts on the water. Wrote one online investing pundit: "All sorts of WorldCom silliness now overshadow the improving economy, low interest rates and firming outlook for corporate earnings," Virgin writes.

WorldCom SchmurldCom says Glenn Frazier. The blogger says, and using Pew Research as his weapon no less, that Democrats hoping the WorldCom scandal will drop President Bush's approval rating are whack. Not only that, making an issue at of it come mid-term election time is useless. "Considering that the recent headline-grabbing business failures have been caused by malpractice and not by underlying economic factors, looking for widespread doom in the wake of WorldCom isn't just craven, it's hopeless," Frazier writes. Whatever, I'm too drunk to get into this issue.

Monday July 1, 2002 @ 6:50 PM EDT
Money for sale! Money for sale! Politicians had no problem taking WorldCom money in the past, but now they're trying to unload it like there's no tomorrow. "In WorldCom's home state of Mississippi, Democratic Rep. Ronnie Shows, in a hotly contested House race against Republican Rep. Chip Pickering, plans to give $6,000 in WorldCom donations to a relief fund for laid-off WorldCom workers. Shows is criticizing Pickering for refusing to do the same with his campaign contributions," The Associated Press reports.
New York AG Eliot Spitzer on the prowl again; looking for scandals and some good PR for his move up the political ladder. Kidding, sort of. I like Spitzer, but I want to him really nail someone for more than $100 million like he did with Merrill Lynch.
The BBC answers some frequently asked questions about WorldCom's accounting scandal. "So it's all over? Not so fast. WorldCom is likely to get bankruptcy protection. And many of its businesses are actually quite profitable. It's just that WorldCom piled up too many debts during its years of rapid expansion. If WorldCom is sold off in bits, some of that money could be recovered.
No soup for you, and no new government contracts for WorldCom. The General Services Administration is investigating whether or not to award any new Fed contracts to WorldCom. I expect the GSA to do what they did to Enron... cut 'em off.
Another profile of Bernie Ebbers, this time from The Atlanta Journal-Constitution. All these profiles include the reaction of locals from Ebbers' hometown. ""If there was falsification of documents and he knew about it, then he should be liable," said George Hennington Jr., a fellow member of the Brookhaven Country Club and part-owner of a men's clothing store. I heard Bernie is a pretty good golfer... but can he beat me? I'll wager $3.8 billion that he can't.
Bernie goes to church to atone for his sins.
Ousted CFO Scott Sullivan probably wouldn't lose his big ass home in Florida if a civil judgement was levied against him. He's building a big house, and he may just end up in the big house. What a terrible pun. Someone will eventually write a story, "From the Big House to the BIG HOUSE."

Monday July 1, 2002 @ 4:49 PM EDT
Reuters reports that a bankruptcy filing by WorldCom is the most likely course of action. ""Bankruptcy could be much sooner than we expected; in a matter of weeks if not less," Guzman & Co. analyst Patrick Comack told Reuters. "Their balance sheet is going to be in a lot worse state."
Even though EDS cancelled a deal with Proctor & Gamble today, the company says WorldCom's problems are their own and won't impact the company materially. One analyst even said ending the relationship may be the best thing for EDS to do.
Time reports that Presidential advisor Karl Rove and deputy chief of staff Josh Bolten are pushing hard for proposals that go well beyond the President's earlier calls to hold executives more accountable for the accuracy of their balance sheets. We'll see if Bush listens. This is part reform, part 2004 campaign strategy.
Pension funds in California, New York and North Carolina are banding together to stop the corporate blood bath. The three states are putting forward a proposal that would make investment banks severe from their analyst firms. The idea has already been put into place at Merrill Lynch after the firm was taken to the woodshed by New York Attorney General Eliot Spitzer. "For California, which expects to have sold more than $25 billion of debt by the end of 2002, the broker-dealer rules are especially important as it chooses debt underwriters," Reuters says.
I got a postcard today from The Neighborhood, a MCI unit, that said my service request has been delayed due to high volume. The 'Hood basically offers wireless pricing for landlines (i.e., flat rate on local, long distance, voicemail, etc.). I've been told the service is quite good. We'll see if it lasts.
Anyone else notice that the number of analyst and publication awards that WorldCom has won has gone down steadily since 1997?

Monday July 1, 2002 @ 3:02 PM EDT
WorldCom breaks its own record for most heavily traded stock in one day. It's like Barry Bonds hitting 74 home runs.
The Financial Times brings you their WorldCom coverage. Sort of ignored them because I thought they had flipped to a subscription model. A couple of FT reporters chime in with a report on "cookie jar accounting."
The International Monetary Fund, no stranger to contorversy, felt it necessary to comment on WorldCom's recent announcements. "I also think that the international community as a whole should review issues related to accounting, disclosure and corporate governance," IMF Managing Director Horst Koehler said.
A reader writes via IM that CNBC (Joe Kernan perhaps) came up with a new term; "EBITDA - Earnings Before I Trick Dumb Auditors."

Monday July 1, 2002 @ 2:10 PM EDT
Over 1 billion shares of WorldCom stock have been traded today, accounting for over half of the volume on the Nasdaq.
The Guardian Unlimited has set-up a WorldCom Special Report page that includes links to their coverage. What I've always liked about The Guardian is its' straight-forward tone and insightful analysis. The English view of American-style capitalism is always an interesting read.
On that note, The Guardian had some kind words for this very weblog. "This daily blog provides dozens of links to comment, analysis and news on the foundering telecommunications company."

Monday July 1, 2002 @ 1:17 PM EDT
Good stuff from the inside here... WorldCom sales people are obviously in a bad spot. Imagine trying to sell corporate services for a company whose name is now considered just a notch above evil. To that end, WorldCom has a instituted a new policy that includes a six-month window for new and renewing customers to cancel their agreements:
WorldCom Customer Guarantee
As a testament to WorldCom's commitment to our customers, we will, for a limited period of time, offer a guarantee for any new customer signing a WorldCom agreement or any existing customer renewing their current WorldCom agreement.
The WorldCom Customer Guarantee allows new and renewing customers to cancel their new or renewed agreements for any reason during the first 180 days following the effective date of the agreement. In order to exercise this right, the customer must provide WorldCom with at least 30 days written notice. The customer must reimburse WorldCom on a pro rata basis for any up front credits received, and of course remains responsible for paying all charges incurred up to the time of service termination.
We recommend that you personally discuss the WorldCom Customer Guarantee with your customer in order to deliver a strong message of WorldCom's commitment to complete customer satisfaction. This offer may be combined with any other WorldCom service offer.
Beginning immediately, you may engage your Business Development or Legal team via current processes specific to your sales channel to incorporate this promotion into a new or renewal agreement. The promotion will be available July 1st - July 31st and contractual language will be available via Insite on July 1st.
Here is some of the actual sales language that will be used:
WORLDCOM CUSTOMER GUARANTEE
Customer may terminate this Agreement at any time during the first 180 days following the Effective Date. Customer may exercise this right by providing WorldCom with written notice of its intent to terminate no less than 30 days prior to the termination date. In the event of termination under this provision, the Customer shall reimburse WorldCom on a pro rata basis for any up front credits received, and shall pay all charges -incurred up to the time of the service termination date, but shall have no obligation to fulfill any applicable Annual Volume Commitment. This right shall expire in the event Customer does not exercise it during the first 180 days following the Effective Date.
Well, it is the cook out season and WorldCom could be in for a grilling... on Capitol Hill. "WorldCom -- a relative newcomer on Capitol Hill with few political favors to dispense or collect -- drew particular ire from Tauzin and Michigan Rep. John D. Dingell, the ranking Democrat on the House Energy and Commerce Committee, for its high-profile opposition to the measure," The Baltimore Sun reports.
CommunicationsWeek International editor Dave Molony did an online chat with USA Today readers this morning. "Anything could happen to the operation: breakup, MBO, sale to a holding company. Would AOL get operating synergies? The AOL/TW merger was supposed to put content and networks together, and it hasn't worked - yet. As for the market valuation - the stock is now 7 cents and that doesn't seem to make sense, if you look at the revenues and assets. But if Worldcom goes Chapter 11 the shares won't be worth anything, so I guess some shareholders have decided that's what is going to happen," Molony said.
From a current WorldCom employee... "Whatever happens, an example MUST be made of Ebbers and people like him. He's played with a lot of people's lives and they can't let him get away with it. I hope on July 8th, he and Grubman and Sullivan appear in person -- not through their attorneys."
The fine folks at Corporate MoFo have chimed in on the WorldCom mess. The article relates to that and the Martha Stewart controversy. WARNING: Contains language unsuitable for minors and sexual references.

Monday July 1, 2002 @ 12:48 PM EDT
DEFAULT... WorldCom announced today that it has defaulted on $4 billion in credit facilities. The means that the company's stock could be delisted from the Nasdaq and the company may very well be forced into bankruptcy if creditors demand immediate repayment (though the article does not state this.
Finally, a good feature story. The Fort Worth Weekly tells the story of former WorldCom financial analyst Kim Emigh. "Two months after Kim Emigh blew the whistle -- internally -- on the accounting impropriety, MCI Worldcom laid him off -- the only full-time worker he knows of to be let go during that round of "reductions," the article reports. "Worldcom officials declined to comment on Emigh's treatment or his allegations because he has filed suit against the company. His story of accounting improprieties -- his judgment on that is backed up by several experts -- may seem small potatoes compared to the company's other woes. But it reaches close to the top of the Worldcom empire. Also, it seems to fit with a larger pattern of alleged questionable accounting that has resulted in the broad-ranging SEC investigation. His story sheds light on how, once again, the managers of a corporation with a giant presence in Texas may have put greed ahead of principles, leaving investors, customers, and straight-arrows like Kim Emigh on the losing end." Another FIVE STAR ARTICLE. Long, but well worth the time.

Monday July 1, 2002 @ 11:59 AM EDT
Plea... A recently laid off WorldCom employee I'll identify as "K" gave me a non-working email address to reach him/her. You know who you are. If you're reading this, please drop me a line. I want to make sure you're doing ok.

Monday July 1, 2002 @ 11:30 AM EDT
Shares of WorldCom began trading again today and the stock promptly plummeted. WorldCom shares are hovering in 7 cent range.
Shares of MCI also began trading again this morning. The stock last traded at a $1.68 and when it opened today a share could be yours for about $0.23. MCI shareholders will get paid a dividend on July 15 though.
WorldCom's audit committee will review accounting for 1999, 2000 and 2001.
Complying with an S.E.C. mandate, WorldCom today issued a sworn statement regarding its' admission of an accounting error. " On June 24, 2002, the Audit Committee conducted an expanded Audit Committee meeting with senior management and a number of additional directors, attorneys from Simpson Thacher & Bartlett, attorneys from Weil, Gotshal & Manges LLP, and representatives from KPMG. Mr. Rodgers and Richard Howell attended the meeting by telephone on behalf of Andersen. Andersen informed the Company that in light of the transfers of line costs during 2001 and the first quarter of 2002, Andersen's opinion regarding the Company's 2001 financial statements no longer could be relied upon. They stated that Andersen had not known of the transfers, but declined to respond to questions regarding how Andersen's audit activities could have failed to discover the transfers. While noting that KPMG had neither audited nor formally reviewed any of the financial statements in question, Mr. Malone and Teresa Iannaconi of KPMG observed that they agreed with Andersen's conclusion that the transfers in question could not be supported by GAAP. In light of the positions of Andersen and KPMG, the Committee concluded that they should report to the Board that a restatement of the Company's financial statements for 2001 and first quarter 2002 would be necessary. The amounts of the transfers by quarter were $771 million in the first quarter of 2001, $610 million in the second quarter of 2001, $743 million in the third quarter of 2001, $931 million in the fourth quarter of 2001, and $797 million in the first quarter of 2002. A full Board meeting was scheduled for the morning of June 25, 2002. Mr. Sullivan and Mr. Myers were advised that if they did not resign from their positions with the Company before the Board meeting, they would be terminated," the company reported.
S.E.C. Chairman Harvey Pitt continues to hit the airwaves and blast WorldCom and other corporate wrong-doers. "I don't want to prejudge any case but ... from what I've heard, I'm outraged. The American public is outraged. Criminal charges may be too good for the people who brought about this mess," Pitt said on NBC's "The Today Show."

Monday July 1, 2002 @ 4:30 AM EDT
My fellow New York Post columnist Chris Byron has written a blistering piece on WorldCom. "We can doubtless all agree that WorldCom is a terrible company. And it's sure hard to see how a guy like Bernie Ebbers - who began adult life as a bouncer in a bar, then clawed his way up to become a milk-truck driver - could ever wind up running the second-largest phone company in America, with revenues approaching $40 billion a year, without eventually running it right into the ground - which of course, is what he has now done," Chris writes. This is one of the best commentaries I've read yet as Byron points out that AOL attempting similar accounting tricks in the '90s before succumbing to whiney analysts (before they got their names in the paper) and took a one-time charge to offset how they did their books. This is a barn burner of an article. FIVE BLARZING STARS!
Sometime on Monday, WorldCom is expected to give a report to federal regulators detailing their little $3.85 billion accounting problem. The report will be given under oath. ""If there's even an iota of false statement in there, people will pay heavily. If the truth is in there and people get to know at least what the circumstances are, then we'll have an informed market, and there won't be insiders who can play games with the unsuspecting public," S.E.C. Chairman flapped on ABC's "This Week" program on Sunday.
The Wall St. Journal, via Dow Jones Newswires, via SmartMoney.com, reports that the S.E.C. investigation is quickly focusing on ousted CEO Bernie Ebbers. "Mr. Ebbers's tight control of WorldCom has raised questions about how such a large overstatement of profits could have occurred on his watch without his knowledge," the WSJ reports on Monday.
From my favorite newspaper, The Christian Science Monitor reports on the affect of WorldCom's news on Clinton, Mississippi, home of the telecom's headquarters. "It's hard for residents here to believe that Mr. Ebbers - a devoted Christian and big town booster - was to blame. Many still cling to the belief he didn't know what was going on," CSM reports. Awww. USA Today also has a story about Clinton. Hmm, the words "scandal" and "Clinton" sound familair.
When the pressure was too strong, WorldCom simply began lying.
More potential WorldCom fallout... the commercial real estate market in Loudon Co., VA just outside of D.C., would go to shit. They already said they'd sell their Pentagon City (also in NoVa) offices.
Another WorldCom teetering on the edge of bankruptcy article. "On its balance sheets, WorldCom claims it has $39 billion in physical assets, but on the open market, assets such as fiber optic networks may not sell for their appraised values," the article states. Thanks scoop.
As mentioned earlier (scroll down), WorldCom couldn't make the cover of Time. Time's article provides a good overview and provides a nice comparison of WorldCom and Enron. But I'm surprised that they couldn't turn up any new facts. Still, it's worth reading.
Ooops... I wrong. Newsweek put the Pledge of Allegiance scandal on the front page. Yawn. This is really a right-wing news story that has little bearing on our daily lives. Why? Because a lower-court judge made a decision and that decision will be appealed, go to the Supreme Court eventually and be decided just as the Constitution intended it to be. Least we forget the Pledge has only been in the schools for about a half-century, and it was put there during the height of the "Red Scare." Don't let the pundits fool you, this is a non-issue and when the Congress went to recite the Pledge last week, most of the knuckleheads didn't know all the words. Anyway, off that tangent, here's Newsweek's article again. I linked it when it went online early Sunday morning and it's a solid article.
U.S. News & World Report chimes in with a rather droll WorldCom article. "More pain also lies ahead for WorldCom's suppliers like Nortel and Lucent. And the sector's collapse will quite likely delay new services, including broadband Internet access and 3G (third generation) wireless," the mag reports. All in all, the three major, national and general interest weekly news magazines dropped the ball to go with previously planned July 4-themed issues (Time with Lewis & Clark, US News with a history of American music) or with tabloid-like filler (Newsweek's Pledge cover). Considering this story broke on Tuesday evening, I think they could have done better jobs covering WorldCom.
Hehe, Pitt vs. Ebbers, this time it's personal, reports Business Week. "The irony is that Ebbers finds himself in this predicament because, unlike former former Enron Chairman Kenneth Lay and Global Crossing CEO Gary Winnick, he didn't sell his stock as the price slid. Instead, he borrowed money from WorldCom to pay off his loans in an effort to avoid flooding the market with his shares -- and driving down the share price even further."
I was on Forbes.com looking for an article or two and came across this banner ad. Um, better get a copywriter.
Can telecom rise again? Fortune asks. Possibly, but remember this... a lot of telecoms that went down the crapper last year still have assets. If I remember correctly, after going bankrupt Viatel couldn't find a buyer for its assets. There's a Trans-Atlantic cable sitting at the bottom of the ocean right now collecting, er, sea urchins.
Btw, when Fortune released its 500 top U.S. companies list earlier this year, WorldCom placed 42nd. The ranking is based on 2001 revenue. WorldCom placed 90th on the Global 500.
Scott Herhold from The San Jose Mercury News says there are four myths that lead to corporate cheating. Pretty much dead on, though it's like beating a dead horse now.
Herhold's compatriot Dan Gillmor says we better be careful. If MCI and other WorldCom assets hit the market via bankruptcy, Gillmor says the Baby Bells will extend their monopoly and create more artificial competition. "But, as several people have suggested to me, the phone companies will probably do this only on one condition -- that they escape serious regulatory review. The Federal Communications Commission and Department of Justice, especially in their current anything-goes political configurations, would be likely to go along with anything that preserved jobs and service," he writes.
WorldCom will close its' Dallas area customer service center on Aug. 23 (first item).
Off topic, but hey, it's my website. My New York Post column this week concentrates on a little controversy Dallas Mavericks' owner Mark Cuban stirred up after he made public his opinion on a government decision on webcasting royalties. Pissing match!