WorldCom, the giant telecommunications company that has been brought to its knees by an accounting scandal, saw its share price fall a further 93 percent Monday to a record low of only six cents. Bernie Ebbers, a slow talking Canadian, built WorldCom and headed the Mississippi-based company until his dismissal two months ago.
Bernie Ebbers, 58, had delivered milk and worked as a bouncer in a bar in Edmonton, Alberta, before accepting a basketball scholarship to Mississippi College in the early 1960s. He's been in the American South ever since. It was in 1983 that Mr. Ebbers founded a company that resold long distance phone service it purchased directly from AT&T. With deregulation just taking hold in the U.S. telecommunications industry, that small company steadily expanded, buying dozens of other companies. It eventually became WorldCom.
In 1997 Mr. Ebbers outbid British Telecom to win Washington-based MCI, the second biggest U.S. long-distance phone company. With that $87 billion deal, WorldCom and Mr. Ebbers became major players in global communications. One year later, Mr. Ebbers arranged for WorldCom to pay $129 billion to take over Sprint, another big U.S. phone and data company. In an October 1999 conference call, Mr. Ebbers spoke about the merits of the deal.
The combination of MCI WorldCom and Sprint creates nothing less than the most dynamic, capable, most growth oriented, most fully integrated communications company in the world. And I am not blushing when I say that. The new company, which will be called WorldCom, is uniquely equipped to market and develop communications products and services that are growing the fastest data, internet, wireless, local and international.
The WorldCom-Sprint merger would have been the biggest merger ever. However, it was vetoed as detrimental to competition by government regulators in both Western Europe and the United States. That period, early 1999, was the high point both of WorldCom's share price ($55) and its power.
In early 2000, what we now know was a "bubble" in the high-tech sector burst and share price in telecommunications have been declining ever since. Analysts say that Mr. Ebbers deal making practice was predicated on a constantly growing economy and stock price. With the economy and the market slowing, banks and other creditors began to focus on WorldCom's huge debts.
After the Texas based energy company, Enron, filed for bankruptcy at the end of last year, analysts began looking at the accounting practices of high-flyers, fast-growing companies like WorldCom. With Mr. Ebbers having taken on huge personal debts in part to buy Canada's biggest cattle ranch, WorldCom early this year chose to lend more money to Mr. Ebbers rather than have him sell his huge holdings of WorldCom stock. The Securities and Exchange Commission, the U.S. government regulator, said it wanted to examine WorldCom's accounting.
In February Mr. Ebbers addressed the issue in another conference call with analysts. "As you know, the company guaranteed my margin obligations to a bank and loaned me money to make payments on the margin loans," he said. "Our board of directors determined at that time that these arrangements were in the best interests of shareholders, effectively minimizing the risks of me having to share any additional large blocks of WorldCom shares to cover margin calls, further hindering the stock among other considerations."
By April, Mr. Ebbers was out, fired by his own board of directors. Only weeks later, the company would reveal massive accounting irregularities for 2001 and the first quarter of 2002.
President Bush said he was outraged and the government filed a lawsuit against WorldCom. Congress has demanded that Mr. Ebbers and others answer questions at a July 8 hearing. Analysts say WorldCom may declare bankruptcy.
Seventeen-thousand workers are being dismissed. Share trading, halted last week, resumed Monday, and the price fell another 90 percent to six cents. Mr. Ebbers, whose share holdings were once worth billions, making him among the world's richest men, now has WorldCom holdings that are worth almost nothing.