Separate WorldCom's criminals from its other employees

Somehow I missed this, but apparently it's open season on WorldCom, with no bag limitations. This week the U.S. Telecom Association fired away, calling for changes in the tax laws so that bankrupt companies such as WorldCom no longer can use those laws to gain a competitive advantage over non-bankrupt companies (see story below). USTA President Walter McCormick was particularly direct in his comments, saying, "The nation shouldn't have to endure another WorldCom."

It's easy to understand McCormick's ire. WorldCom will have to pay only about a third of the $1.5 billion fine assessed by the U.S. Securities and Exchange Commission as a direct consequence of those laws. It already has received a $300 million tax refund after filing an amended return based on its actual earnings, which will take a great deal of the sting out of that $500 million SEC fine. Plus, current tax laws likely will allow WorldCom to carry forward a $6.5 billion loss, which will allow the company to avoid paying taxes on future earnings for several years. Theoretically, this will make WorldCom an even more nimble competitor to USTA's largely ILEC constituency after it emerges from its bankruptcy proceeding. Where's the justice?

However, I think McCormick's thinking has been clouded by the heinous accounting fraud allegedly perpetrated by former CFO Scott Sullivan and former Controller David Myers, who currently are under federal indictment. Their alleged actions devastated millions of people, from WorldCom's creditors to its shareholders to the pensioners who lost their retirement nest eggs. If they are found guilty, Sullivan and Myers should be stripped of their expensive suits, their wealth and what little dignity they still have.

But WorldCom employs tens of thousands of honest, hard-working people who had nothing to do with this. They are the ones who would be hurt by the type of tax reform USTA seeks. Keep in mind, given the $6.5 billion in losses it seeks to carry over, that WorldCom could well have ended up in bankruptcy court even if the accounting scam had never occurred. Would USTA be screaming about WorldCom's reemergence then?

Bankruptcy laws exist for a reason. Without them, innovation would die. Bankruptcy laws allow companies to push the envelope and to recover when they falter. That's good for the economy and good for consumers.

Shifting gears, the Illinois General Assembly this week passed a law that would make it illegal for anyone driving the state's highways to be in the outermost left lane, unless they were passing another motorist. Apparently it's a response to some road rage incidents that occurred because the lead driver in the left lane purposely drove slower than the surrounding traffic in an effort to put the brakes on speeders. The problem is that Illinois drivers routinely drive 10 to 20 miles per hour over the posted limit on the state's highways because they know enforcement is virtually nonexistent. In effect, then, the legislature has set aside a lane for these scofflaws by passing this law. Pretty moronic, huh? Then is it any wonder why SBC Communications wants the Illinois legislature setting wholesale rates instead of the Illinois Commerce Commission?

Finally, FCC Commissioner Kevin Martin, speaking this week at Supercomm in Atlanta, told attendees there would be "no surprises" in the final triennial review when it is issued. Good thing. Considering that the summary order was issued more than three months ago, can you imagine how long the telecom industry would have to wait for the final language had significant deviations from the summary order developed?

E-mail me at gbischoff@primediabusiness.com.