Toil and Trouble

An interesting point, that is rarely touched upon, regarding The Street and accounting practices, is that there has been a shift in thinking from "what is specifically allowed", to "what is not disallowed". In other words, if there is no set, or pending regulation prohibiting specific accounting procedures...then why not try it.
Its still all about greed, but its been a mindset that has been eroding what passes for ethics in the corporate world.

Clinton, Mississippi would be hit hard? If WorldCom packed up all its workers and offices in Loudoun county, Virginia, the office vacancy rate there would skyrocket from 17% to 32.9%

See the Washington Post article about that, here.

Many people have been warning of the corruption in big business accounting for years, and now they are proven right with huge scandals like Enron and WorldCom.

It is quite sad that those responsible, the big-name CEOs, are probably going to get off scot-free, or maybe pay some hefty fines.

I think that WorldCom is probably dead. Their disclosure was such a huge violation of trust that shareholders may never have confidence in them again. And of course, customers will avoid them. Who wants to buy service from an unstable company? That's one of the main reasons I decided to buy DSL from Verizon rather than a CLEC!

With some companies, it's just too bad. Level 3 has worked hard to lay fiber-optic cable all over the U.S., but they're having a hard time earning money from it.

So... I hope this "oops we lied about our profits" period doesn't last too long, but serves to weed out the dishonest companies, leaving behind the trustworthy ones. I think that's the best we can all hope for.

As long as the pyramid of workers continues to pull stones from the bottom, and put them on the top (metaphorically speaking) this will continue. The crashes have been a long time coming, as it's a microcosm of the country as a whole. The richest 1% of people suck as much life blood out of the less wealthy as possible, until there's nothing at the bottom left to support them, then the stones come crashing down. Even then, the super rich, with enough money to last them practically forever, don't release it back into the market to allow lower classes of people to once again afford the products which help drive the market. True Marxism can't be much worse than this.

said by Angrychair:

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True Marxism can't be much worse than this.

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Yes it can be far worse. Marxist goverments killed approx. 110 million of their own citizens in the 20th Century.

»www.hawaii.edu/powerkill ··· .ART.HTM

Hitler killed millions.
Hitler was a capitalist.
Therefore, capitalism causes murder.

»www.intrepidsoftware.com ··· firm.htm

Surprise surprise. Just got notice from my ISP that MCI has all but shut down their dial-up UUNET service. My ISP told mt that the service stopped authenticating users Friday evening and has been down ever since. They have been unable to get in contact with anyone at UUNET concerning this issue and was unable to give me an ETA for repair.

The fallout begins....

Sorry, but Hitler was a socialist, in charge of the National Socialist Party.

"So... I hope this "oops we lied about our profits" period doesn't last too long, but serves to weed out the dishonest companies, leaving behind the trustworthy ones. I think that's the best we can all hope for."

Unfortunately, that may not even be the end-result.
The "trustworthy" ones or the ones that are left will be the ones who can either disguise their operations the best, or ones who get unabashed government subsidy (either legislatively or politically, directly or indirectly), to help further their agendas and make money for politicians.
The reason WCOM came clean was because they were already being investigated.
It is not to say that there are not "honest" businesses and businessmen in this country, but they are rapidly becoming the minority.
It is a very sad state of corporate affairs in this country, with no levels of accountability maintained.
It has to change now.

You are correct that the change in the rules of the game were changed in the early 1990's to allow this sort of stuff. Historically it starts oh about the time Jimmy Carter was president. Over the last 8 years it was very easy to juggle the number kind of like a real estate limited partnership under the tax laws of the 1980's. Sad thing is young executives thought this was a way of business companies that stood up and didn’t do this didn’t get the venture capital or the opportunity to actually go public during the boom days. I know the late 1990's was a time in America were the honest folks were punished if you were moving up the ladder in a company or worse if you had a small business and were trying to grow. Basically you were encouraged to juggle your books.

The most positive thing is out of the chaos of this many of these companies will be forced into liquidation. They will leave some real bargains as for as what has been done as far as infrastructure if the capital is available to do this correct this time. Unfortunately infrastructure like WorldCom is going to the baby bells. I prefer SBC because if you love them or hate them they always provide average service its never up or down. Some good things though can come out of this bone pile I believe in the long run.

The SEC chairman also announced today folks would be facing financial penalties though not a pure Death sentence like I would like. Financial fines and sentences work with white collar because jail time doesn’t work with white-collar folks nor keep them honest. You must understand white collar does understand in our judicial system you have two sides to the law and if you hire the best liar I mean lawyer you many times can win or cop a favorable plea. You get tough with the financial penalties and make allot of them stick well you weak backboned accountant and slick talking execs are more focused into line. The consultants forget it most are failed CEO's and CFO's who are flawed and failed for a reason. They also have little place in the restructuring of this financial mess.

I also am all for the legal firms and the security firms that are the real devils advocate of the whole situation getting what’s coming to them also. Quite a few attorneys being dis-bared would be fine.

said by Beeper:

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Sorry, but Hitler was a socialist, in charge of the National Socialist Party.

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Hitler was a Fascist, get your facts straight.

said by mr sean:

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An interesting point, that is rarely touched upon, regarding The Street and accounting practices, is that there has been a shift in thinking from "what is specifically allowed", to "what is not disallowed". In other words, if there is no set, or pending regulation prohibiting specific accounting procedures...then why not try it.
Its still all about greed, but its been a mindset that has been eroding what passes for ethics in the corporate world.

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I agree with you completely, but I would like to extend that line of reasoning to the consumers as well. Companies are not the only ones who are greedy and will take advantage of whatever they can. People do it too. Just look at all the insurance fraud that takes place. People will stop at nothing when it comes to a quick buck.

The facts are that his politics was fascist, and his economics were socialist. The political and economics are two completely different things.

Nationalsozialistische Deutsche Arbeiterpartei (NSDAP) – National Socialistic German Workers Party – 1920 to 1945 (and forever during the the Nurnberg trials). Hitler joined in 1920, became its leader/fuhrer in 1921, and 12 years latter (in 1933) the NSDAP was the largest political party in Germany. Socialist in name; repressive, brutal, corrupt and dictatorial in nature.

Oops, that description might also apply to a lot of the greedy “lion kings” of today’s business world, huh?

”I went to a restaurant that serves ‘breakfast at any time’. So I ordered French Toast during the Renaissance.” - - Steven Wright

said by Beeper:

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The facts are that his politics was fascist, and his economics were socialist. The political and economics are two completely different things.

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Your ignorance is showing Beeper, because that couldn't be further from the truth. In no way, shape, or form is Fascism like socialism. The "National Socialist" title is mis-leading, like "conservative" is in the UK, where that is what the liberals call themselves.

Er. Historically, you are wrong. If you look at the policies of National Socialism in Germany during the 30s and also at the policies of Stalin at the same time in the then-USSR you see parallel trends in terms of what was done.

The difference between Fascism and Marx-Lenin socialism [which masqueraded under the title of Communism, but which bore little resemblence to the philosophical treatise proposed by Marx] is actually little to known. Both emphasize totalitarianism under the state. It is in this way that once you go to the extreme right or to the extreme left, there is no difference between the two philosophies except in rhetoric.

Having worked for two Dot Bombs and having seen the sausage being made I can say this: Accounting has become something it was never meant to be, its the supermodel of the business units in most "new thinking" companies and it was inspired by VC's giving a nod and a wink on how to best pimp companies pre-IPO.

Accounting was meant to be a dry statement of historic factual results and conservative, quantifiable forecasts, instead it is more of an extension of the marketing department/CEO roadshow. Dressing up results is expected, performing radical plastic surgery is encouraged and dimming the lights while putting lipstick on a pig is all too common. The problem is, that this spin game has no end and you must spin faster with every quarter to keep up the charade. In the Dot com world, going IPO was the goal, once that was achieved, the VC's got their money and the insiders who dressed things up would keep up the pretense long enough to keep up the share price while they "trickled out" their shares. This only worked until the 4Q of 1999, when an alarming number of these pigs started wobbling in their high heels immediately after IPO or in some cases pre-IPO.

Where do you think all these "talented" accounting minds went after their get rich IPO schemes fell apart? BINGO - fortune 500 companies, who could now get all the benefits of dot.com accounting without having to actually improve their sales. Only problem is, these companies are already public, so there is no IPO coming out party at which the fat cats can quietly slip out the back door with heaps of cash. There was an alternative "event" however, which would allow them to cash in. THE MERGER and ACQUISITION game. It created sufficient movement and market attention to allow management to cash out at its conclusion without much problem. But what happens when you are as big as regulators will let you become? Answer: WORLDCOM and ENRON. After buying all that could be bought and sucking in their gut for as long as possible, these two pigs eventually had to produce at a level no company could achieve due to their crushing debt load. We all know what happened next.

HERE PIGGIE PIGGIE PIGGIE!!

said by pupowski:

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Your ignorance is showing Beeper, because that couldn't be further from the truth. In no way, shape, or form is Fascism like socialism.

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Let me repeat for the people slow on the uptake.

Fascism was a political system used by Hitler, built around a strong leader and contempt for democratic values

Socialism was a economic system used by Hitler, built around state plans for industry and its outputs, largely directed to remilitarizing the nation.

Politics does not equal economics.

The German economy was command driven by dictates from the Economics Ministry interpretations of the whims of the Hitler. They had state developed command plans like Goering's 4 Year Plan that were intended to rearm the nation, and to reduce unemployment. On that part, they were successful, at the cost of their gold reserves and massive deficit spending.

Having the government set output targets in industry
and agriculture smacks of socialism.

So, what you really meant to say, was it started with Reaganomics. Good, I wanted to clear that up....

Ah yes, "Greed is Good."

Well, now the slaughterhouse is at full power and the pigs are being marched up the ramps to meet their fate... and taking the hopes, aspirations, and dreams of millions with them.

These are the people the F.B.I. should be kicking in the doors on... The C.E.O.'s, the C.F.O.'s, the Board of Directors... not the guy twiddling with his cable modem bandwidth cap.

Does anyone actually think we'll see any long term change because of all this scandal? I know there is legislation hitting Congress that is supposed to create an accounting oversight committee....but I'm not sure that will pass.

Anyone think we'll see a brief "age of honesty" in the corporate world, if for nothing else, than out of fear of hyper scrutiny of accounting?

Or will the financial tricks simply getting so elaborate only 200 IQ mathematicians can understand them, with lobbying wrapping up any loose ends?

Financial tricks have little to do with math.. It's all about the knowledge of the various obscure laws that allow you to hide things easily.. or mislabel..

Problem is that many people misunderstand the audit process in accounting. Auditors do not look for fraud unless specifically requested... Fraud audit is a lot more complicated and time consuming, therefore more costly. This is why most firms don't bother with one.. even though more often than not.. they really should.

I think this sums it up nicely:

The Nazi economy can be characterized as a combination of both economic systems: capitalism and socialism. The Nazi economy was not socialism because most big businesses remained untouched, that largely meant encouraging big businesses, supporting powerful entrepreneurs such as Siemens, borisig, kropp, Thyssen, advocating enforced cartelization, elimination of inefficient small businesses and subsidizing industries. At the same time it was not capitalist because the state increasingly usurped the means of production. The Nazi economy was really a war economy in peacetime, which was directed by the need for the highest possible efficiency and productivity required for the conducting of war.

From »www.nyu.edu/classes/keef ··· rat.html

Regardless, Hitler's particular brand of dictatorship is not the issue. Your argument equating Marxism with mass-murder is an obvious logical fallacy.

Naw the seed was planted in Jimmy carters day but came to bloom with both Mr. Clinton's in the White House!!!

Always remember the Mantra:

Rule #1:
Anything bad = Democrats fault
Anything good = Republican's credit

Rule #2: If Rule #1 is wrong, edit/change/modify to suit, then see Rule #1

Frankly hate to tell you this but democrats and republicans are both whores to this anyone involved in this knows you pay both sets of whores to get your legislation though.

Anyway the jimmy carter time line is when FASB started heading or being legislativly pushed in this direction.

And the 80's is when it came into effect, and was more deregulated in the 90's by the "new" Congress....

said by Beeper:

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Having the government set output targets in industry and agriculture smacks of socialism.

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The United States has done that in time of war but this is not a socialist nation. Hitler was at war or preparing for it from the moment the Nazi's gained control of the German government. Wartime socio-economic policies are similar for Communist, capitalist, and fascist nations, but peacetime economies are not. In peacetime the Facscism is Corporatitism, the joining of Government and industry according to Fascist Dictator Benito Mussolini.

quote:

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Accounting was meant to be a dry statement of historic factual results and conservative, quantifiable forecasts, instead it is more of an extension of the marketing department/CEO roadshow.

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I absolutely agree, but it will never change until parties with authoritative power (ie. accounting firms) are held accountable (hah, not a pun). I expect executives to spin information about their company to suit their interests (investors: caveat emptor).

Additionally, most auditors just look at the books that they are given. If you're cooking the books, with reality on a second set, most auditors won't see them - much less know about them. Unless you're too sloppy to cover the slime trail, your average auditor isn't going to catch you. And even if the auditors do see that someone's cooking the books, as long as their supervisor's supervisor's supervisor tells them to not worry about it (or cooks the audit report) the truth still won't come to light.

Personally, as someone who used to work part-time for a small, local accounting firm, I'd just as soon see these guys lose their licenses. Permanently. And the accountants I know agree. Scum is scum, no matter the initials on the end of their name (MD, PhD, CPA, MBA, etc.) Lock these guys up and sell their ill-gotten assets.