Für mich ist Worldcom ein klarer Turnaround, es ist nur eine Frage offen, bleiben nun die alten Aktien oder gibt es doch neue?
WorldCom, now known as MCI, had been making great strides in its journey out of Chapter 11 bankruptcy, as a report this week by Richard Breeden, a former regulator, acknowledges. But the state of Oklahoma has filed charges against it, and other states may follow suit, possibly jeopardising the settlement with federal regulators
UNTIL this week it appeared as if WorldCom, now known as MCI, was making good progress in its journey out of Chapter 11 bankruptcy, which it had been forced to enter after racking up America`s biggest-ever accounting fraud under the flamboyant Bernie Ebbers. A report into the telecoms operator issued this week by Richard Breeden, a former chairman of the Securities and Exchange Commission (SEC) who was appointed by the bankruptcy court, acknowledged the strides made by the company, which has a completely new management. Mr Breeden`s report came up with a series of corporate-governance recommendations designed to ensure that the fraud could never be repeated at MCI. Mr Breeden also hopes his report will be used as a model of good practice across corporate America. However, there are still several obstacles in the way of MCI`s emergence from bankruptcy, which is scheduled for next month. Chief among them is a new set of criminal charges filed this week by the state of Oklahoma, which looks set to be followed by other states. It is unclear, as yet, if the charges will delay the hearings in the bankruptcy court. Ironically, they may jeopardise any criminal trials of former WorldCom executives, including Mr Ebbers, that federal regulators may be planning to bring.
Oklahoma is claiming that the company and six individuals, including Mr Ebbers, wilfully presented investors with false information, based on which it sold shares in the company. If found guilty, the individuals could spend ten years in jail and/or be fined $10,000 on each of 15 counts. The company could incur a maximum fine of $150,000. The indictment is unusual on two counts. First, federal authorities have already charged several people over the $11 billion fraud at WorldCom. (And MCI has agreed to pay $500m in cash and $250m in stock to settle SEC fraud charges.) Federal authorities prefer to conduct such investigations themselves, without state involvement, in order that any settlement apply nationwide. SEC officials were irritated when Eliot Spitzer, the New York attorney-general, took the lead in the investigation into conflicts of interest between analysts and bankers on Wall Street.
It is also unusual that Oklahoma is seeking to charge the company, as well as the individuals. Federal regulators have refrained from suing WorldCom for fear of the collateral damage it would inflict on the group’s creditors, its more than 50,000 employees, thousands of business customers and 20m retail customers. Moreover, the company, and four of the individuals charged by Oklahoma, have co-operated with the authorities. To reward that by suing the company might discourage other mismanaged companies, or guilty low-level employees, from co-operating in future.
Federal regulators may try to stymie action by Oklahoma—and other states—by refusing to hand over the evidence they have gathered. The SEC and the Justice Department both released statements saying they were “disappointed” by Oklahoma`s lack of co-operation. James Comey, the attorney in New York who is leading the criminal investigation, warned that “competing interests can impede and delay the administration of justice”.
Federal regulators had also launched an investigation into whether MCI avoided paying access fees to American local telecoms carriers a few weeks ago. MCI’s rivals—AT&T, SBC Communications and Verizon—allege that the company wriggled out of paying local-access charges from as far back as 1992 by improperly re-routing calls through Canada. The company denies the charges. But a group of creditors, who stand to lose if the action further damages MCI, say that the rivals are engaged in a deliberate smear campaign designed to drive customers away from MCI. There are other, longer-standing actions. One group of creditors claims that the then WorldCom avoided hundreds of millions of dollars in state taxes by using a special tax shelter. These allegations could be the subject of civil lawsuits in the states of West Virginia, Alabama and Arkansas.
MCI has agreed to implement all 78 of the recommendations in Mr Breeden’s report. These go much further than the corporate reforms devised by the New York Stock Exchange and by Congress, in the form of the Sarbanes-Oxley bill, which was drawn up in response to the frauds at WorldCom and Enron, an energy trader. In particular, Mr Breeden recommends that all directors but the chief executive be independent; that the positions of chairman and chief executive be split (this is fairly common in Britain but still rare in America); that pay be limited to $15m a year per executive, unless the shareholders agree otherwise; that no stock options be granted for five years, and that future options be written off as expenses immediately. Mr Breeden has also recommended further powers for shareholders—to elect directors, or to veto their election, and to participate in electronic “town hall” meetings. Moreover, Mr Breeden has said that the new code should be written into the company’s articles of incorporation, ensuring that it can be changed only by shareholder vote.
It was inevitable that MCI would accept Mr Breeden’s recommendations—doing so is an essential part of securing approval to move out of bankruptcy. However, Mr Breeden’s hopes that they will become a blueprint for corporate America may prove unfounded. There are already signs of resistance to further regulation, if not a backlash. William Donaldson, the current SEC chairman, and Alan Greenspan, chairman of the Federal Reserve, have both publicly expressed concern that too much regulation could be hampering confidence and entrepreneurship.
Big businesses, too, seem to be emerging from a period of self-flagellation. R.J. Reynolds, a tobacco company, is defiantly keeping information about its legal costs from the SEC. And LaBranche, a marketmaker on the New York Stock Exchange, is withholding some 8,000 e-mails from the exchange in a row over how an investigation into trading practices is being conducted. The Conference Board, a business group, is milder than Mr Breeden in its recommendations on governance, suggesting merely that companies “carefully consider” splitting the roles of chairman and chief executive. After all, it could argue that Mr Ebbers was chief executive only, but that did not stop him bringing WorldCom to its knees.
WorldCom, now known as MCI, had been making great strides in its journey out of Chapter 11 bankruptcy, as a report this week by Richard Breeden, a former regulator, acknowledges. But the state of Oklahoma has filed charges against it, and other states may follow suit, possibly jeopardising the settlement with federal regulators
UNTIL this week it appeared as if WorldCom, now known as MCI, was making good progress in its journey out of Chapter 11 bankruptcy, which it had been forced to enter after racking up America`s biggest-ever accounting fraud under the flamboyant Bernie Ebbers. A report into the telecoms operator issued this week by Richard Breeden, a former chairman of the Securities and Exchange Commission (SEC) who was appointed by the bankruptcy court, acknowledged the strides made by the company, which has a completely new management. Mr Breeden`s report came up with a series of corporate-governance recommendations designed to ensure that the fraud could never be repeated at MCI. Mr Breeden also hopes his report will be used as a model of good practice across corporate America. However, there are still several obstacles in the way of MCI`s emergence from bankruptcy, which is scheduled for next month. Chief among them is a new set of criminal charges filed this week by the state of Oklahoma, which looks set to be followed by other states. It is unclear, as yet, if the charges will delay the hearings in the bankruptcy court. Ironically, they may jeopardise any criminal trials of former WorldCom executives, including Mr Ebbers, that federal regulators may be planning to bring.
Oklahoma is claiming that the company and six individuals, including Mr Ebbers, wilfully presented investors with false information, based on which it sold shares in the company. If found guilty, the individuals could spend ten years in jail and/or be fined $10,000 on each of 15 counts. The company could incur a maximum fine of $150,000. The indictment is unusual on two counts. First, federal authorities have already charged several people over the $11 billion fraud at WorldCom. (And MCI has agreed to pay $500m in cash and $250m in stock to settle SEC fraud charges.) Federal authorities prefer to conduct such investigations themselves, without state involvement, in order that any settlement apply nationwide. SEC officials were irritated when Eliot Spitzer, the New York attorney-general, took the lead in the investigation into conflicts of interest between analysts and bankers on Wall Street.
It is also unusual that Oklahoma is seeking to charge the company, as well as the individuals. Federal regulators have refrained from suing WorldCom for fear of the collateral damage it would inflict on the group’s creditors, its more than 50,000 employees, thousands of business customers and 20m retail customers. Moreover, the company, and four of the individuals charged by Oklahoma, have co-operated with the authorities. To reward that by suing the company might discourage other mismanaged companies, or guilty low-level employees, from co-operating in future.
Federal regulators may try to stymie action by Oklahoma—and other states—by refusing to hand over the evidence they have gathered. The SEC and the Justice Department both released statements saying they were “disappointed” by Oklahoma`s lack of co-operation. James Comey, the attorney in New York who is leading the criminal investigation, warned that “competing interests can impede and delay the administration of justice”.
Federal regulators had also launched an investigation into whether MCI avoided paying access fees to American local telecoms carriers a few weeks ago. MCI’s rivals—AT&T, SBC Communications and Verizon—allege that the company wriggled out of paying local-access charges from as far back as 1992 by improperly re-routing calls through Canada. The company denies the charges. But a group of creditors, who stand to lose if the action further damages MCI, say that the rivals are engaged in a deliberate smear campaign designed to drive customers away from MCI. There are other, longer-standing actions. One group of creditors claims that the then WorldCom avoided hundreds of millions of dollars in state taxes by using a special tax shelter. These allegations could be the subject of civil lawsuits in the states of West Virginia, Alabama and Arkansas.
MCI has agreed to implement all 78 of the recommendations in Mr Breeden’s report. These go much further than the corporate reforms devised by the New York Stock Exchange and by Congress, in the form of the Sarbanes-Oxley bill, which was drawn up in response to the frauds at WorldCom and Enron, an energy trader. In particular, Mr Breeden recommends that all directors but the chief executive be independent; that the positions of chairman and chief executive be split (this is fairly common in Britain but still rare in America); that pay be limited to $15m a year per executive, unless the shareholders agree otherwise; that no stock options be granted for five years, and that future options be written off as expenses immediately. Mr Breeden has also recommended further powers for shareholders—to elect directors, or to veto their election, and to participate in electronic “town hall” meetings. Moreover, Mr Breeden has said that the new code should be written into the company’s articles of incorporation, ensuring that it can be changed only by shareholder vote.
It was inevitable that MCI would accept Mr Breeden’s recommendations—doing so is an essential part of securing approval to move out of bankruptcy. However, Mr Breeden’s hopes that they will become a blueprint for corporate America may prove unfounded. There are already signs of resistance to further regulation, if not a backlash. William Donaldson, the current SEC chairman, and Alan Greenspan, chairman of the Federal Reserve, have both publicly expressed concern that too much regulation could be hampering confidence and entrepreneurship.
Big businesses, too, seem to be emerging from a period of self-flagellation. R.J. Reynolds, a tobacco company, is defiantly keeping information about its legal costs from the SEC. And LaBranche, a marketmaker on the New York Stock Exchange, is withholding some 8,000 e-mails from the exchange in a row over how an investigation into trading practices is being conducted. The Conference Board, a business group, is milder than Mr Breeden in its recommendations on governance, suggesting merely that companies “carefully consider” splitting the roles of chairman and chief executive. After all, it could argue that Mr Ebbers was chief executive only, but that did not stop him bringing WorldCom to its knees.
