"...at least he was honorable in that he didn't trade against his shareholders, as did Lay and Winnick."
Ray,
Does this mean that you are willing to let Ebbers keep the $400 million that he borrowed from WCOM? Ebbers is no better than Winnick and the Enron boys. He may actually be worse. Time will tell. It looks like WCOM may have been cooking the books all the way back to 1999.
Lay is certainly not off the hook. The Enron indictments will probably start to come down in late summer or early fall. Going after WCOM management is more of a slam dunk as you have the current management cooperating with the Feds.
WorldCom hints at deeper damage
By James P. Miller
Tribune staff reporter
Published July 1, 2002, 4:04 PM CDT
chicagotribune.com
WorldCom Inc. revealed to federal regulators today that an internal audit may have uncovered additional accounting improprieties dating back to 1999, and that its lenders have declared the company in default on some loan agreements.
The disclosures follow last week's bombshell that WorldCom used accounting gimmickry to overstate profits for the past five quarters, and moved the fallen telecom giant closer to bankruptcy.
On Wall Street, Nasdaq lifted the trading halt on WorldCom stock in place since Wednesday, after WorldCom disclosed it hid up to $1.22 billion in losses by improperly accounting for $3.85 billion in expenses. In extremely heavy trading, WorldCom's already-battered shares fell 92 percent to close at 7 cents.
Because the company's shares no longer meet Nasdaq's minimum-price requirements, the exchange began proceedings to delist WorldCom shares by Friday.
Today's revelation that WorldCom's lenders have declared the company in default on certain loan agreements was expected. That move clears the way for lenders to demand that WorldCom repay more than $4 billion it owes them at once: such a move would almost certainly drive cash-strapped WorldCom into bankruptcy.
Still, recently installed Chief Executive John Sidgmore said the WorldCom is "optimistic" that talks now under way with the lenders will yield a "positive resolution."
The in-house audit committee that has been scrutinizing WorldCom's books is now delving into records as far back as 1999, WorldCom said in a sworn statement filed with the Securities and Exchange Commission. "In particular," the company's statement noted, "questions have been raised regarding certain material reversals of reserve accounts during 2000 and 1999."
The parent of long-distance provider MCI didn't offer additional details, but the Mississippi company said that so far "no conclusion has been reached regarding these entries."
Corporations establish reserves by setting aside money to cover costs they foresee in the future; if they're involved in high-stakes litigation, they may put aside $100 million to fund a settlement or an adverse verdict.
If it turns out they don't need the money, companies can later "reverse" the set-aside, which pumps up profits for the quarter when the reversal occurs.
Also today, shareholders filed two separate class-action suits against WorldCom, alleging that the company's fiscal misrepresentations violated federal securities law. |
