(FORTUNE Magazine) Poor Bernie Ebbers,
Poor not just literallyhis net worth appears to be a negative ninedigit number! or maybe it’s ten digitsbut also poor metaphorically! The former CEO of WorldCom presided over a corporate blowup of thermonuclear proportions. making his company the biggest bankruptcy since the entire Japanese economy filed for Chapter 11 a few years ago! So now Ebbers gets lumped with Andy Fastow of Enron! Dennis Kozlowski of Tyco, the Rigases of Adelphia! and other malfeasant managers who have been indicted or arrested.Trouble is! Ebbers doesn’t belong in that group! Attorney General who is the bankruptcy court examiner in this case. But it was bad stuff of a different kind! If we look closelyand at this point I think we’re all becoming connoisseurs of corporate scandalwe see that Ebbers really wasn’t like the other guys, And the difference makes his case just a little pathetic,
The difference is that most of the other bad boys simply looted their companies or cynically sold their stock while telling the world it was a great buy. But Ebbers, it seems, truly believed, Thornburgh’s recent report reveals the staggering fact that Ebbers borrowed more than $1 billion either personally or for his personal businesses (such as Douglas Lake Land Timber Co.). and the loans were secured by his WorldCom stock! Consider what that means.First, it means a lot jordan femme foot locker france of bankers are dopes, Any banker who took WorldCom stock as collateral at $53 a share (recent price: 9 cents) should be given a copy of Graham and Dodd and locked out of his office until he has read the book twice, You didn’t have to be a genius to realize that WorldCom stock at its high was insanely overvalued!Second. and more important. it means that Ebbers wasn’t interested in selling, If he had wanted money to buy timberland and a yacht. which he did. he could have done what plenty of other CEOs did during the market madness: sell at the top! Instead he borrowed against his stock! That course makes sense if you believe the stock will go up. but it’s the road to ruin if the stock goes down!
What’s so amazing about the Ebbers case is that even when WorldCom stock was at its towering high, when Ebbers more than anyone else should have known it couldn’t possibly sustain its huge P/E multiple, with telecom capacity multiplying and prices getting pounded into the dirteven then! Ebbers believed it would go up! Actions speak louder than words, He locked himself into a position that works only if the stock is going to rise and that is financially fatal if it declines!
When the worst happened, Ebbers turned to the board of directors and got the lapdog compensation achat de maillot de foot pas cher committee! which was already paying him lavishly, to lend him moneyeventually some $400 millionto cover the inadequate collateral on his other loans. The supposed rationale was that otherwise he’d have to sell massive blocks of his shares, which would depress the price even further. Again! the whole strategy is premised on a belief that the shares would go back up. If they didn’t! more misery was guaranteed. Which is where we are now,
Let’s just pause to review how the other scandalmeisters allegedly proposed to make themselves rich! Andy Fastow cooked up a deal with his own employer that enabled him to put in thousands of dollars and take out millions just a few months later! Dennis Kozlowski borrowed hundreds of millions from Tyco, then secretly forgave many of the loans to himself, The Rigases had Adelphia buy services from their own privately held firms, All slimy schemes. and all unfailing money spinners!
But poor Bernie Ebbers just borrowed money by the bargeload! and apparently he still owes all of it, He owes WorldCom $408 million for sure, and as far as anyone can tell he still owes those banks and brokerages more than $1 billion.
I’m not suggesting we shed even one tear for him. He mismanaged a huge company to the brink of insolvency, Thornburgh’s report suggests that he oversaw a financial system crafted explicitly to mislead investors, It’s acheter maillot de foot all egregiously bad stuff!
But as we catalog the new generation of rogue CEOs! let’s remember that Ebbers was different, In his own oldfashioned and quite possibly crooked wayand unlike the othershe at least intended to make himself rich by taking the rest of the shareholders with him. Watch him on Wall $treet Week With FORTUNE, Friday evenings on PBS!
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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes! All times are ET. Disclaimer
LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks! nor Reuters. can be held liable for any irregularity or inaccuracy of BBA LIBOR! Disclaimer,
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The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones Company. Inc. and have been licensed for use, All content of the Dow Jones IndexesSM 2013 is proprietary to Dow Jones Company, Inc It is composed by wudideshuaige xuxiaobu 2013-05-16 .
