June 27, 2002
By Kelly Greene and Rick Brooks
The Wall Street Journal
When WorldCom Inc.’s Bernard J. Ebbers resigned as chief executive amid mounting debt problems nearly two months ago, many supporters and employees of the big telecommunications company consoled themselves with this thought: At least it isn’t another Enron.
They aren’t saying that anymore.
With the revelation that $3.8 billion in expenses was improperly booked as capital spending, employees, shareholders and even longtime supporters in the company’s home state of Mississippi are wondering how they could have been duped, and what it will mean for their lives.
WorldCom has said it plans to lay off 17,000 more employees out of its work force of 80,000, beginning Friday. With the company struggling to find money to keep going, few are betting that will be the end of the bad news.
“We’re pretty much in shock that we’ve been snookered,” said Thomas “Tico” Hoffman, owner of the popular Tico’s Steak House on the north side of Jackson, Miss., which is about 10 miles from WorldCom’s headquarters in Clinton, Miss.
Jai P. Bhagat, founder of Air2Lan Inc., a broadband-service provider based in Jackson, said last month that he thought WorldCom would bounce back. Now, he says, “I don’t feel much hope. … To me, it doesn’t look like anything different from Enron. How could this go on for five quarters?” Mr. Bhagat was CEO of SkyTel Communications Inc. when WorldCom acquired it in 1999. Now, he says, “I think SkyTel would be better off if somebody would buy them.”
The local mood toward Mr. Ebbers “has changed 180 degrees,” said Jerry Kountouris, who runs the Mayflower Cafe, a Jackson diner. “For us down here, it’s shocking.” Mr. Kountouris has two employees whose husbands work for WorldCom, one of whom told him Monday night that “they’re just keeping their fingers crossed. They have three little kids.”
Many WorldCom employees were told Wednesday not to talk to reporters, and reporters who approached them were asked to leave company property. But several workers interviewed outside a suburban Atlanta office where WorldCom has been consolidating its nearby operations said they haven’t been told anything about the fate of their jobs. Employees said they were trying to plow ahead with their normal work despite a swirl of rumors.
“You don’t feel like getting out of bed in the morning,” said a 55-year-old WorldCom manager. He isn’t overly worried about his financial situation, he added, because he runs a “side business” and has some savings. “It’s just like Enron. People are going to be hurting.”
“I don’t know what I’m going to do,” another WorldCom employee said, as he walked to his car in the packed parking lot. He’s already doing one thing: looking for another job.
A two-year employee at WorldCom’s Arlington, Va., offices said her parents called Tuesday night with the news. “Someone cooked your books,” they told her before asking what it means for her job.
Lawrence L. Klayman, a lawyer at Klayman & Toskes in Boca Raton, Fla., represents dozens of current and former WorldCom employees in lawsuits alleging that they lost millions of dollars after following the advice of Salomon Smith Barney, a unit of Citigroup Inc., about handling their stock options. He said many of those same workers, whom he describes as being “all throughout the ranks,” have started calling him back to see whether he can help them recoup losses from company stock in their 401(k) plans as well. “They’re very upset, and they’re hurting. They’re losing their entire life savings and their jobs.”
With WorldCom’s stock trading at 83 cents a share on the Nasdaq Stock Market before the latest revelation, and not trading Wednesday, shareholders aren’t any happier.
Mr. Kountouris of Jackson’s Mayflower Cafe said he owned about 1,300 WorldCom shares, 300 of which he bought at around $35 to $40 apiece, and the rest went it dropped below $10. But that is a fraction of the loss that longtime workers and retirees in Jackson are taking, he says. “People had been depending on that for the rest of their lives,” he said. “We have another Enron right in our own backyard.”
Jeff Good, who co-owns Bravo Italian Restaurant & Bar in Jackson, described the local reaction among employees and investors as “more mourning than anger. … A month ago, we had 14 people come in who all got hammered. They had just been laid off from WorldCom, and they stayed here drinking all afternoon.”
Not everyone was downbeat. “People are taking it with exceptional grace,” a programmer in Richardson, Texas, said. “In my experience with MCI, I have never worked for a better company.”
— Stephanie Horvath, Audrey Warren and Betsy McKay contributed to this article.