Piling on MCI

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Still another out-of-control, dysfunctional institution recently joined the wolf pack seeking to devour MCI to advance their own narrow special interests. Oklahoma Attorney General Drew Edmondson announced criminal charges last month not only against six long-gone former company executives responsible for a massive accounting fraud at the company. He announced criminal charges against the company itself as well.

Headline-grabbing state attorneys general with visions of higher office have become another broken component of our increasingly abusive legal system. Mr. Edmondson's grandstanding, unilateral action was harshly criticized by Justice Department and Securities and Exchange Commission officials handling criminal charges and punishment for the case.

Mr. Edmondson joins far-left unions like the Communications Workers of America and the International Brotherhood of Electrical Workers seeking to use the accounting scandal to shut down MCI because the company's workers have repeatedly refused unionization.

MCI's corporate competitors have joined in calling for MCI's demise as well to eliminate one of their fiercest competitors. They have financed a gaggle of front groups to echo their cause, including such notables as the Grey Panthers, Friends of the Earth, Arianna Huffington and the United Church of Christ.

This collective circus has heavily pressured the federal government to terminate the more than $1 billion a year in federal contracts serviced by MCI, and to yank the FCC licenses the company needs to service its private customers. In response to this pressure, the General Services Administration temporarily suspended MCI on July 31 from bidding on new federal contracts, until all necessary reforms at the company have been implemented.

What this chorus won't tell you is that it was the company itself that discovered and publicly revealed the accounting fraud, which overstated the company's profits by $11 billion over a three-year period, even though that revelation forced the company into bankruptcy just a few weeks later. The company also immediately dismissed its top financial officers involved in the scandal, and cooperated fully in all investigations and prosecutions.

The company has also now replaced its entire former board of directors. Among the new independent directors are former U.S. Attorney General Nicholas Katzenbach, Dennis Bereshad, former head of the Financial Accounting Standards Board, and Jack Rogers, former CEO of Equifax. The new CEO of the company is Michael Capellas, formerly president of Hewlitt Packard, and CEO of Compaq Computer Corp.

The entire former corporate leadership has been replaced as well, including the president, chief operating officer, chief financial officer, general counsel, and director of internal controls. The former finance and accounting department has been closed and 400 new finance and accounting personnel have been hired.

Former SEC Chairman Richard Breeden also heads an oversight team appointed by the bankruptcy court. In the past few weeks, MCI has adopted 78 recommendations for reform from that team. This includes innovations such as term limits of 10 years for board members, a ceiling on executive pay without a shareholder vote, an all independent board comprised of members from outside the company, except for the CEO, and greatly increased shareholder control through a greater ability to nominate board members and offer binding shareholder resolutions.