Fortune magazine reported that Bernie Ebbers, the founder and former CEO of Worldcom, the nation’s second-largest long-distance corporation, owes the company $408 million in loans lent to him by the board of directors when he was chairman of the board.
“Ebbers is in no position to pay,” Fortune reported. “His wealth was largely in Worldcom stock, which is down 97 percent over the past three years, reducing the value of his holdings to less than $20 million.”
Worldcom and Ebbers now have an arrangement whereby Ebbers will repay his loan over a five-year period with most of the payment being made at the end of this timeframe.
Fortune noted that “where Ebbers will be getting $200 million in 2007 no one is saying.”
Worldcom “includes among its assets a $408 million receivable from an ex-employee who doesn’t even plan to begin paying it off until next spring,” Fortune said.
The telecommunications giant reported $3.85 billion in accounting irregularities, claiming a profit when the company was really losing hundreds of millions of dollars.
Worldcom’s disclosure of its accounting problems has resulted in a Securities and Exchange Commission fraud lawsuit, congressional hearings and investor lawsuits. As many as 17,000 employees may lose their jobs. Worldcom’s stock prices have fallen to as low as a nickel per share from a record high of $64.50, costing investors their hard-earned money.
In the midst of America’s market crisis, the White House has issued a steady drumbeat that the Ebbers-and-Worldcom type problems represent “some bad apples.”
President Bush has repeatedly said that the vast majority of corporate CEOs are “good, honorable people.” Bush said 95 percent were honest.
The problem with Bush’s position is that the problem is more than some bad apples. The problem is a lot of bad apples. The problem is systemic. It is pervasive and includes some in the White House.
More bad apples exist than Ebbers and Worldcom. After all, they don’t even hold the record for corporate charity to CEOs.
The Rigas family actually holds the record, according to Fortune. They are the founders of Adelphia Communications, a cable-TV company whose name appeared on Nashville’s new football stadium, Adelphia Coliseum.
The Rigases borrowed over $2.3 billion “from banks, with Adelphia guaranteeing the loans,” Fortune said. “They invested most of that money in Adelphia shares, which have plunged 99 percent in the past three years.”
Other bad corporate apples include Enron, Arthur Andersen, Rite Aid and Xerox. Bad apples include the Securities and Exchange Commission with its cozy relationship with corporate CEOs. Bad apples include the congressmen who have opposed federal regulation with teeth. Bad apples include the legal system that lets white-collar crime go unpunished. Bad apples include lax corporate boards controlled by CEOs.
So is the situation some bad apples? Or is Federal Reserve Chairman Alan Greenspan correct?
In congressional testimony, Greenspan said the problem was “infectious greed.” He said that “too many corporate executives sought ways to ‘harvest’ … stock market gains.”
“It is not that humans have become any more greedy than in generations past,” Greenspan said. “It is that the avenues to express greed had grown so enormously.”
Greenspan understands the crisis in corporate corruption is more than a character issue. It’s more than a matter of private ethics. It is more than a few CEOs who need to get their hearts right.
The corporate culture itself is spoiled. That’s why we need countervailing forces, such as tougher laws, more aggressive law enforcers and independent watchdog organizations. We need a free national press, not one owned by some of the corporations in big trouble.
We also need to debunk some myths that mask the free marketplace, such as wealth reflects God’s blessing, money in politics doesn’t corrupt politics and the business model is the way to run government.
Robert Parham is BCE’s executive director.