Is WorldCom's bankruptcy America’s moral cancer?

The scandal of the Enron bankruptcy is still vivid; however, a new one is breaking out. Another company, WorldCom, is the talk of the town these days. As it turned out, quite unexpectedly, the company, the same way as Enron, attempted to conceal losses and overstate its profits to lead investors and stockholders astray.

WorldCom is one of the leaders in America’s long-distance communication industry and a first-rate Internet provider as well. It has become a popular saying that the company was founded “by a pious Christian from Mississippi," Bernie Ebbers. The man withdrew from the company’s management in May 2002. Under the present-day situation, financial director of the company Scott Sullivan, who is now accused of a $4 billion overstatement of the company’s profits, is very likely to become a scapegoat. In fact, WorldCom's debt to creditors makes up about $30 billion.

Having learned the lesson of the Enron scandal, the US authorities reacted to the information immediately. George W. Bush promised to find and punish those guilty of the crime; SEC Chairman Harvey Pitt announced on Wednesday that, if some faults were found in financial reports presented by American companies, the heads of the companies will be called into criminal account. At the same time, one more American telecommunication operator is in for hard times: Quest Communications shares dropped by 57% Wednesday as soon as SEC announced its tough position concerning the financial reports of companies. The Wall Street Journal reports that the matter concerns the sale of the company’s fiberoptic lines to the sum of $1,4 billion and the way the money was accounted for. When the company sold its capacities, it bought the same amount from its rivals. Quest Communications is trying to persuade the SEC that the accounts of the transactions are adequate.

The problems of these companies have entailed other, even greater problems. Information about the murky deals resulted in a quotations downfall on the US stock exchanges. However, the optimism of the US Federal Reserve looks rather strange against this background; the Federal Reserve says that the country's economy has a stable tendecy of growth, even despite the recent scandals involving the US’s largest companies. Most likely, the US Federal Reserve knows something important, of which even the president is ignorant. The president still calls upon foreign investors to invest in American companies.

Many experts in the USA say that the scandals around the activities of some of the largest companies can seriously dirty image of American businessmen. Ex-president of Telecom Italia Gido Rossi says that the USA is devoid of shame. It looks like a moral cancer when presidents of US companies are not declared thieves after such misdeeds. So, former WorldCom president Bernie Ebbers has enough food for thought between attending church and driving a tractor at his brother’s ranch.

Vasily Bubnov PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://www.pravda.ru/main/2002/06/27/43358.html