WorldCon (GOP influence ?)
cast iron skillet
---------------------------
World con: As business scandals
deepen, the White House finds itself under fire
Posted on Sunday, June 30 @ 10:22:59 EDT
---------------------------------------------------------
By Ed Vulliamy, The Guardian Observer
Uneasiness and shame are emotions uncommon among those who shell out more
than $20 for an appetiser and $279 for a bottle of wine at Les Halles
restaurant, in the ever-darkening shadow of Wall Street. Indeed, the 11
September tragedy last year made those who lunch here feel righteous - after
all, stockbrokers are people too.
Scott Sullivan was the kind of person that diners like Irene Stubner of the
ING investment bank really admired. 'Young and quite cute,' she says, and a
Chief Financial Officer who had 'gotten to the top using his brain to get
rich and powerful and put his company on the map'. Sullivan used to eat here
from time to time when he was in town, but he hasn't been seen around for a
while.
Until he was fired this week, Sullivan was CFO of the second biggest telecom
company in the United States, and one of the biggest global couriers of
traffic on the internet - now better known as the biggest alleged fraud in
corporate history: WorldCom.
WorldCom's name is still plastered over advertising billboards and shop
windows of New York, the iconic symbol of the logged-on, plugged-in,
palm-piloted, always-on-the-cellphone way of living. Except that way of life
is suddenly discovering its limits, and WorldCom is a target of mockery at
best, outrage at worst.
And Sullivan's name and face are all over the tabloid newspaper stands: he
has become an emblem of greed and the target for a new popular anger and
contempt at the rot being unpeeled at the core of the financial apparatus.
Preceded by Enron and followed by Xerox, WorldCom is one in an apparently
never-ending line of household corporate names sinking into a mire of sleaze
and corruption, dragging the dollar and the global image of American
business with it.
The practice that brought this about is called 'backing up'. It comes about
when chief financial officers like Sullivan do anything they can to avoid
catching the eye of the analysts at securities firms who may see their
company's profits falling below a consensus estimate - with the subsequent
punishment of a plunge in stock value.
For the diners at Les Halles, the whole point of the boom 1990s was that the
higher the share value, the bigger the personal bonus. So it's simple: the
higher the stock, the higher the bonus; the more money you get to spend on
champagne and take home afterwards.
But sometimes, making sure of the right share value (hence the right bonus)
will mean doing things the wrong way round: rather than work out your
company's sales and deduct the expenses to calculate the profit, you do the
reverse.
You start with what your shareholders - and the securities analysts - expect
the profit to be, and change the figures to make sure that it comes out
right. Within limits, this is general practice; it's called 'earnings
management'.
But there are limits, and if they get pushed too far an enterprising
executive with a 'stock option' package built into his or her salary can
earn tens of millions of dollars within a couple of years of landing the
right job with the right company. And that is what Scott Sullivan, among
others, is accused of doing.
The authorities are also realising that this practice - and others similar -
are not confined to one or two rogue companies like the infamous Enron,
which built elaborate (and allegedly criminal) structures to accumulate
hidden wealth - they are the norm; they are how the 'Enronomics' of modern
greed work.
'You could say,' admitted Irene Stubner, as she and her colleagues prepared
for next weekend's 4 July celebrations at The Hamptons, 'that things aren't
quite normal right now'.
Indeed, they are not, for the ramifications of the sleaze have punctured not
only the atmosphere at lunch in Les Halles but the entire dream on which a
mass shareholder class was fed.
The language that now abounds is that of a popular uprising. Even the
right-wing tabloid press - usually sympathetic to corporate interests -
joined in this week, with Rupert Murdoch's New York Post running a special
'World Con' section reading: 'Wall Street is looking more like Fraud
Street.'
Christopher Byron, the unauthorised biographer of squeaky-clean domestic
diva Martha Stewart - herself now under the shadow of another scandal - has
pitched himself as the people's voice on sleaze, and says: 'Is it any wonder
that people are scared of the stock markets? Crooked accountants, lying
analysts, tax-cheat CEOs. Every day brings more shocks and outrages from the
corner of American businesses, and the people are getting the message: "the
stock market - forget it!"'
Howard Schilt, author of the already best-selling book Financial
Shenanigans, believes that white-collar crooks have been unpunished too
long. 'There's a lot of corruption,' he says, 'and too many managers just
lie to enrich themselves with our money. The typical white-collar criminals
never get sent to jail - but now it's time to start doing it'.
The scandals have rocked Washington and redefined the political agenda. For
the first time since 11 September, there is a bitter, domestic issue to the
fore. The administration of President George Bush has been rocked back on
its heels - joining the chorus of condemnation, with a major speech on
corporate reforms planned for next week.
Mindful of the fact that nearly half of all voters are shareholders, Bush
has so far reacted in language that echoes Teddy Roosevelt's famous lines
about the 'malefactors of great wealth'. But most analysts see in his
reaction a case of the jitters. Bush has extremely close ties to those
malefactors - no administration has been so closely associated with, and
beholden to, corporate America.
Backstage, his senior advisers are either worried that too strong a
condemnation risks biting the hand that feeds them, or fear that the
administration cannot avoid being further tarnished by scandals affecting
their friends. And it remains to be seen whether the President supplements
the rhetoric with a fresh Department of Justice criminal probe of WorldCom
and the like, and makes good his promises to send the guilty to jail. 'We
are waiting,' says one 'Bushwatch' website, 'with bated breath'.
No one has yet suggested that the WorldCom scandal could strike at the heart
of the Bush administration quite as starkly as Enron, but there are
embarrassing connections that could spiral into a political scandal.
Details are emerging of a highly amicable and lucrative relationship between
the shamed WorldCom conglomerate and Republican Senate Majority Leader Trent
Lott, one of Bush's closest confidants on Capitol Hill.
The new Trent Lott Leadership Institute received a $1 million donation from
WorldCom to underwrite a fundraising event as recently as 23 May. While the
regulations limit the amount a company like WorldCom and its telecom
subsidiary MCI can contribute to Lott's campaign, there are no such
restrictions on giving to certain types of charitable foundations.
At the same time, Lott has named a senior representative at WorldCom to the
commission studying internet commerce. WorldCom, until now one of the
largest employers in Lott's home state of Mississippi, has a significant
interest in the shape of potential legislation on internet commerce. In
fact, the company has recently lobbied for legislation to compete with rival
telecoms company AT&T's expanding service. Lott has denied that the
appointment to the commission was related to MCI's support of his Leadership
Institute.
WorldCom was seeking political influence at the core of the administration
right up to the eleventh hour before admitting its fraud and rubbing
shoulders with the President. Only last week, the company gave a $100,000
donation to a gala at which Bush was guest of honour; WorldCom's gift was
sufficient to have the firm feature as a Vice-chair of the event on its
programme.
Against such connections, the opposition Democrats are pitching a new
strategy called 'economic patriotism'. Needing to win only six seats next
November to take over the House (and thereby Capitol Hill) and with
governors' man sions up for election nationwide, the party believes it can
turn the vote into a referendum on sleaze.
Even as the WorldCom scam was being announced, the Democratic Leader in the
House, Richard Gephardt, had accused the Republicans of 'creating an
environment' in which corporations could break the law and avoid sanction.
'It is,' said Gephardt, 'telling that in 1995, when the Republican
leadership came in, both Newt Gingrich and (Congressman) Tom DeLay made
statements that the main goal of their effort was to deregulate corporate
America. Well, they did, and now we are seeing some of the results of that'.
The leading independent pollster John Zogby - widely respected in Republican
circles - recently found that voters no longer trust the Bush administration
any more than they do the Democrats on economic and financial issues. A poll
by the Wall Street Journal and NBC television earlier this month showed
widespread distrust of all businesses, from oil companies to brokerage firms
and corporate leaders in general.
After dominating the political scene for so long, George Bush may himself be
reflecting that 'things aren't quite normal right now'.
Reprinted from The Guardian Observer:
http://www.observer.co.uk/focus/story/0,6903,746626,00.html
Liam Devlin
> "cast iron skillet" <frie...@aol.com> wrote:
>
> <>
> <>---------------------------
> <>
> <>World con: As business scandals
> <>deepen, the White House finds itself under fire
> <>Posted on Sunday, June 30 @ 10:22:59 EDT
> <>---------------------------------------------------------
> <>By Ed Vulliamy, The Guardian Observer
>
> Bush. one of the hilarious things about all these guardian articles posted is
> that the Liberal loons take the paper much more seriously than d those who live
> in Britain! LOL
We have more at stake. <wish I could LOL>