Word: worldcom
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...regard for traffic laws. How much confidence should you have then in China's business laws?" Not much. Corruption is rampant, copyright and patent piracy is a way of life, regulation of the financial markets is murky, and Chinese accounting standards could turn the con men of Enron and WorldCom green with envy. What's more, the Chinese banking system is dominated by the government, with loans tending to go to political cronies, state-owned companies and other iffy borrowers...
There's a joke in the accounting trade that the difference between a wobbly grocery cart and a corporate auditor is that the cart has a mind of its own. Very funny, unless you had invested in MCI (formerly WorldCom), which recently announced that the pretax income it reported for 2000 and 2001 was just a tad off--$74.4 billion less than it had said, after writedowns and adjustments. Outside auditors have signed off on bogus earnings reports and balance sheets at companies from Rite Aid to Xerox. In some cases, auditors dealt with corporate brass intent on concealing thievery...
...hours before Ebbers was indicted, Scott Sullivan, WorldCom's former chief financial officer and one-time Ebbers crony, pleaded guilty to conspiring with him to conceal WorldCom's weakening results and submitting false reports to investors and regulators. Sullivan, who is now cooperating with prosecutors, will likely be the key witness against Ebbers. According to the indictment, Sullivan urged Ebbers in a September 2000 meeting to issue a warning to investors that revenue was running below expectations--a warning that would have hurt the stock price. Ebbers refused, the government charges, and the two men agreed to take steps...
...trial will be far more complicated than Stewart's. For one, jurors will have to parse evidence based on accounting issues that are complex and deadly dull. And there are nagging questions as to why Ebbers, who held almost all his WorldCom stock until the bitter end, didn't dump more shares if he knew the price was propped with bogus financials...
...used Tyco money for a yacht, kept his mistresses on the payroll and (possibly therefore) also let Tyco finance a $5 million diamond ring for his wife. How could he have criminal intent if it was all out in the open? By contrast, Scott Sullivan, former CFO of WorldCom, engaged in a more traditional form of gall in pleading guilty to $11 billion worth of accounting fraud. It was a "misguided effort to save the company," he said. Call this the Vietnam defense: it was necessary to destroy the company in order to save...