When honesty is malfeasance

What is the sound of one shoe dropping?
Yesterday’s announcement the Worldcom misreported $3.8 billion ($3,800,000,000!) in expenses as capital items is both astounding and expected.
Let’s face it, the sheer scale is astounding, stupefying. How do you “misreport” that much money?
It’s expected because of what’s going on the market and what led us to this pass.
In the Big Boom, if you weren’t showing a history-defying growth rate, you couldn’t justify your preposterous PE ratio. In the increasingly messed-up telecom market, this would make you an instant takeover candidate.
Consolidation of telecom is inevitable and whoever keeps their stock price up the longest will be one of the three winners. It would be misfeasance to accurately state your financials. That was AT&T’s mistake.
Enron and Worldcom followed the same logic that keeps a compulsive gambler embezzling, hoping for a big win so he can pay off his debts and return the money he stole.
This is the inevitable result of the incremental gutting of our post-1929 restraints on the markets: permitting accountants to sell other services to their clients, allowing investment banks to own retail brokerages, and helping the Baby Bells to use their monopolies to take over their competitors.
The good news is that a couple more Worldcoms might have an impact on the next congressional election and save the country from corporate takeover.
In the meantime, you’d be crazy to have your money in the stock market, whose very premise requires you have as much information as anyone else. Who believes that any more?

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