WorldCom Bankruptcy
August 14, 2002
We’re all familiar by now with the horrendous corporate malfeasance at
WorldCom (not to mention other companies). WorldCom’s bankruptcy is the
largest bankruptcy in U.S. history. The telecom company appears intentionally to
have hidden at least $3 billion, now going on $6 billion in expenses from public
view.
The magnitude of abuse in this corporate debacle is nearly beyond
comprehension. I hope the full weight of our law is brought to bear on those
responsible for this affair.
I’m troubled by WorldCom’s demise on several levels. First, it shatters my faith
in corporate America. Well, sort of. I still believe that small businesses generally
are run well, by good neighbors who still believe that good business should result
in the mutual benefit of consumers and employers alike. And I still believe that
most large businesses abide by these principles, too. In short, most businesses,
like most people, mean well, and do good. We’re being distracted by some very
large abuses by some very large companies.
Nonetheless, the abuses at WorldCom, and other companies about whom we’ve
been reading so much lately, point to a trend in America that is truly disturbing. It
appears that more and more people, at all levels of society, espouse a me-first,
get-rich-quick philosophy, where it’s OK to rob, cheat and steal, with impunity.
The concept of mutual benefit is in trouble in America. Ideas like responsibility,
accountability, honesty, and integrity are becoming just fanciful notions found
somewhere in the dictionary, but not on the street, or in the Board Room. In
other words, not only is what appears to have happened at WorldCom and
elsewhere illegal, it’s immoral. And the sad thing is that the ethical foundation
upon which such morality is based seems to be crumbling. Ever the optimist, I
am hoping that WorldCom’s plight may shine light on that crumbling foundation,
and cause a turn around in how we treat each other in the marketplace and in the
neighborhood.
On a more practical level, I’m troubled by the ease with which WorldCom and
others can escape responsibility and accountability by filing for bankruptcy
protection. It is here that the bankruptcy of WorldCom, Global Crossing and
others may have much longer term, negative effects on the economy in general
and on Montana’s local telecom companies in particular.
Here in Montana,
WorldCom stopped paying its bills months ago to independent phone companies.
These bills are substantial and payment of them is crucial to the survival of rural
telephone companies.
One of the main sources of revenue for these small
companies is the fees they charge to long distance companies for terminating
calls on their local networks. These are called access charges. Access charge
revenues dwarf any revenues that these local companies receive directly from
their subscribers.
Thus, reduction in access revenues dramatically affects
returns on investment, and threatens significant rate increases.
As I said, WorldCom has stiffed these companies for months, with hundreds of
thousands of dollars of unpaid bills. That’s real money that is not coming into
Montana for reinvestment in Montana’s economy. Under normal circumstances,
a company would discontinue service to a customer who fails to pay its bills. But
under bankruptcy protection, Montana’s telcos must continue to provide service
to WorldCom.
To make matters worse, WorldCom’s bankruptcy petition
classifies these rural companies as “utilities,” like water, sewer, or electricity
suppliers, instead of contractors providing a vital service to WorldCom. This
classification effectively places Montana’s telcos lower on the ladder for any
potential repayment of past or current debts.
So for Montana’s independent phone companies, there’s little likelihood they’ll
ever recover what’s owed to them. There’s even less likelihood if WorldCom
succeeds in putting them at the end of the line. And worse still is the fact that
these companies effectively are precluded from taking any remedial action while
WorldCom is under bankruptcy protection.
The perverse moral of the story here is that well run, responsible, ethical
companies are left holding the bag, while the unethical cheats get to turn to the
Court for protection against the very market forces they so blatantly spurned.
The abuse doesn’t end here, either. WorldCom may emerge from bankruptcy
without any debt—the very debt it unethically buried in the first place will be
simply wiped off the books. Thus, they’ll come back ready to do business, but
without any of the normal burdens that the rest of its better-run competitors have.
Essentially, they’ll be rewarded for failing to run their company, while so-called
successful companies who don’t file for bankruptcy protection will be punished.
Twice.
First, they’ll be punished by having somehow to absorb WorldCom’s
debts, and then they’ll be punished again by having to compete with a newly
restored,
freshly
painted
WorldCom,
“protection.”
Now there’s justice for you!
Contact:
Geoff Feiss, General Manager
Montana Telecommunications Association
Helena, Montana
406.442.4316
gfeiss@telecomassn.org
courtesy
of
so-called
bankruptcy