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McI’s Fate
Should the company get the death penalty?


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Deroy Murdock

In the wake of history’s greatest corporate swindle, some free-marketeers demand what could be the guilty company’s death sentence. MCI, formerly WorldCom, could face economic capital punishment if it lost its largest customer, Uncle Sam. This could send revenues into a graveyard spiral and subsequent liquidation. Meanwhile, the Communications Workers of America are nudging MCI toward the electric chair, perhaps to add some sizzle to this union’s life chances.

MCI’s would-be executioners observe that WorldCom (as it was known until recently) inflated its earnings by more than $11 billion. When the true figures emerged, stockholders slammed their phones down and raced for the exits. In the confusion, retirees, employees and investors lost some $180 billion.

“MCI committed the largest fraud in history and cheated thousands of people out of billions of dollars, yet the government continues to bail it out,” Citizens Against Government Waste president Tom Schatz recently complained. He chided the $1.2 billion in federal contracts that MCI has scored since its bankruptcy. Schatz wants MCI to win no more deals with Washington. “Unless the appropriate steps are taken to prevent new contracts with MCI, the government will fail to deter similar behavior by other corporations and continue to put tax dollars at risk.”

James K. Glassman of the American Enterprise Institute believes that “Zombies like WorldCom/MCI are a drag on any economy.” As he told a New Democracy Project panel in New York on June 9: “WorldCom/MCI’s assets should be sold.”

It’s easy to sympathize with Schatz, Glassman, and others who would pull the plug on MCI. Why should taxpayers do business with these thugs?

Actually, they don’t. MCI no longer is run by CEO Bernard Ebbers, CFO Scott Sullivan, and several others who are guilty or suspected of monumental malfeasance. These executives, the board of directors they once served and their accounting firm have all been disconnected. The criminals among them deserve serious jail time. But why should MCI’s 55,000 employees — most of whom were among the last to learn about their bosses’ crimes — be harmed any further?

Analogously, if John Doe robbed a bank, should the entire Doe family — including his sons and daughters — be barred from federal employment? In this light, the understandable impulse to zap MCI with 50,000 volts quickly dims.

In fact, when Manhattan federal judge Jed Rakoff accepted MCI’s $750 million settlement with the Securities and Exchange Commission on July 7, he said “the Court is satisfied that the steps already taken have gone a very long way toward making the company a good corporate citizen.”

Nonetheless, the Communications Workers of America, which represents telecom employees, is among those who want to deny MCI federal contracts. CWA president Morton Bahr foreshadowed James Glassman last fall when he told reporters that “WorldCom should be broken up, and its valuable components like UUNet and MCI spun off or sold to responsible corporations.” Bahr added: “There are many responsible existing companies from AT&T to Sprint that have the ability to-if regulators would approve — purchase UUNet or MCI.”

“Responsible,” in Bahr’s world, apparently means unionized. Indeed, CWA represents workers at AT&T and some Sprint local telephony units. Conversely, its attempts to organize at WorldCom and MCI failed. If MCI splintered, many employees would gravitate towards its unionized competitors. Most then would be required to join the CWA as a condition of employment. CWA’s membership rolls would increase, and its coffers would swell with fresh union dues.

While these workers might frown, CWA would crow. Such an instant membership spike would defy industry trends.

“Joining a union is increasingly undesirable or irrelevant to employees in the highly competitive telecommunications sector,” says Justin Hakes, research associate with the National Institute for Labor Relations. “As such, union membership is plunging.”

Hakes cites Bureau of National Affairs data that count 489,100 union members among 1,170,400 telephonic workers in 1992. Last year, union members fell to 331,600 even as sector employment rose to 1,395,900.

While a thirst for frontier justice is healthy given the banditry of MCI’s departed leadership, its employees today should be spared this effort to transform them into the union telephone operators of tomorrow.

— Mr. Murdock is a columnist with the Scripps Howard News Service.



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