WorldCom overstated its cash flow by more than $3.8B during the last five quarters in what appears to be one of the largest cases of false corporate bookkeeping yet.
The problem, discovered during an internal audit, throws into doubt the survival of WorldCom and MCI.
Analysts see bankruptcy as a strong possibility; trying to avoid that, WorldCom will cut 17,000 employees. "The company has made a few giant leaps toward bankruptcy. For a company with $30B in debt [and] a sector deteriorating from competition ... it's not looking good."
Operating costs like basic network maintenance had been booked as capital investments. CEO: "Our senior management team is shocked by these discoveries." SEC: "accounting improprieties of unprecedented magnitude." Analyst: "This is horrible for the industry."
Analyst: "I would be stunned if [the restatement doesn't] trigger bankruptcy. I am almost certain it will. The math doesn't even work anymore."
WorldCom's news rattled investors in other companies.
I told you so.
And now, for something completely different ...
A klaxon blares out a siren and the cattle begin moving up a conveyor belt into the meat packing plant.
Troy: Come on Jimmy, let's take a peek at the killing floor.
Troy: Don't let the name throw you Jimmy. It's not really a floor, it's more of a steel grating that allows material to sluice through so it can be collected and exported.
They walk through the door of the plant accompanied by the sounds of moo-ing and startled cows. Electricity noise sparks in the background as the camera pans down the length of the factory to a truck marked "Meat For You" being loaded with raw chunks of meat. Troy and Jimmy emerge, with Jimmy visibly pale and queasy.
Troy: Gettin hungry Jimmy?
Jimmy: Uhh, Mr. McClure? I have a crazy friend who says it's wrong to eat meat. Is he crazy?
Troy: Nooo, just ignorant. You see your crazy friend never heard of "The Food Chain". [Flash to a picture of "Food Chain", with all animals and arrows pointing to a silhouette of a human.] Just ask this scientician.
Scientician: [Looking up from a microscope.] Uhhh...
Troy: He'll tell you that, in nature, one creature invariably eats another creature to survive. [Images of various wild carnivores attacking and eating other appear.] Don't kid yourself Jimmy. If a cow ever got the chance, he'd eat you and everyone you care about! [Image of a cow quietly chewing cud.]
Jimmy: Wow, Mr. McClure. I was a grade A moron to ever question eating meat.
Troy: [Laughs.] Yes you were Jimmy, yes you were. [Briskly rubs his hand on Jimmy's head.]
Jimmy: [Timid] Uhh...you're hurting me.