June 29, 2002
A READER SENDS THIS WORLDCOM-RELATED OBSERVATION:
I worked for many years at a big five firm, I have sympathies both ways when it comes to these accounting messes, but with the WorldCom situation, I think the press is missing a few points.
First, the accounting delusions did not cause the company to collapse and 17,000 people to lose their jobs. No, a very bad business model that said if you keeping on growing by acquiring lousy companies, you can become one great big good company, failed (this is simply a variation of the old, we sell everything at a loss but make up for it in volume). All the bad accounting did was extend the time before these people HAD to be laid off. In other words, they were not screwed because they worked for a crooked CFO; they were screwed because they worked for a stupid company.
Second, the CFO was, almost for sure, not trying to defraud people in the sense of achieving any personal gain. Without any personal knowledge of this company, I can almost bet you, what he was thinking, was that if I just buy the company some time, things will correct themselves–and nobody will ever notice how I bridged this problem.
I think that’s probably right.