Everybody loves a winner, as the old saying goes. And I, like many of my fellow senior citizens, am no different.
So when WorldCom (now MCI) and its CEO Bernie Ebbers seemed to have the world on a string in the late ‘90s and early this century, we went along for the ride. We believed WorldCom had cracked the code on how to make big profits in telecom. WorldCom was showing the telecommunications industry a thing or two or three about competition and customer service and high-speed data communications.
WorldCom seemed unbeatable. They won more and more customers. Their stock price kept climbing. The clever Mr. Ebbers seemed unstoppable in his ability to imagine creative deals and parlay his company’s performance into one impressive acquisition after another. I remember wondering if it were too good to be true.
About a year ago, WorldCom began making disclosures about financial misstatements that, like the company’s success in previous years, seemed boundless. When it was all said and done, WorldCom’s fraud totaled nearly $11 billion in overstated income. The company declared bankruptcy, stranding suppliers and creditors. Tens of thousands of employees lost their jobs. Even more lost their savings.
So did all WorldCom’s investors who went along for the ride. The loss to state pension plans across the country is in the billions. Many of those pensionholders are senior citizens like me, victims of the biggest fraud in the history of corporate America: WorldCom.
Most seniors live on fixed incomes. Many rely on pensions, earned over decades of hard work, as their primary source of income. Total loss of a pension payment or serious negative financial impact to a pension fund is devastating to seniors. Although many Americans are witnessing a disappearing act in their savings accounts and nest eggs, it is most troubling for retirees, who have few options for generating new income to replace lost savings.
At this late stage in their financial lives, seniors don’t have time left to reallocate what’s left of their savings and wait for it to grow anew. WorldCom’s fraud has caused an unrecoverable loss to senior citizens. It has robbed retirees who trusted it of their savings, their security and their happiness. The price of that theft can’t be calculated, but it can be punished.
WorldCom should pay for its crimes. While the Securities and Exchange Commission announced it would fine WorldCom $500 million, that only amounts to a single week’s income for the company. After strong initial criticism, it now appears Congress is going to let it off the hook with barely a stern word. And state governments, many of them with pensionholders affected by WorldCom’s fraud, are continuing to allow the company to bid on lucrative telecommunications contracts. As does the federal government.
As if that’s not enough, WorldCom is applying for and receiving tax refunds from the IRS based on fraudulently filed tax returns. It claims it overpaid its taxes because it based its tax payments on the inflated profits it was inventing at the time. And who is paying that tab? Taxpayers. WorldCom is trying to take even more money out of our pockets.
Taxpayers and investors were poorly served by the oversight agencies put in place to prevent the kind of financial shenanigans that brought Bernie Ebbers’ empire down. Washington mustn’t compound the damage merely by giving WorldCom a modest slap on the wrist.
Even if it takes an act of Congress, policymakers should say “no” to WorldCom’s effort to exploit tax laws. Better yet, if WorldCom wants to compete for government contracts, maybe it should be required to set aside a portion of its profits from such contracts to compensate all the people who were hurt by its fraudulent activities.
We may never recoup our lost retirement savings, but at least we would feel that justice has been served.
Jim Martin is president of the 60 Plus Association, headquartered in Arlington, Va.