Robert Landauer, THE OREGONIAN
Saturday, November 8, 2003
"MCI clear to emerge from bankruptcy," a November 1 Business sections headline, prompts a Saturday lament.
MCI if the former WorldCom, the corporate scammer that created $11 billion in profits out of thin air. Its acounting fictions led to the largest corporate bankruptcy in U.S. history.
The financial reorgnization approved by a federal bankruptcy judge will pay back most creditors 36 cents on the dollar. That is better than nothing but more wounding than usual because it stems from coporate dishonesty, not from routine business risks.
It is a genius of U.S. bankruptcy law that it often gives a second chance instead of a corporate death sentence -- preserving jobs, specialized goods and services and better repayment to creditors than would come from ripping out and auctioning off assets.
But saving cheaters from corporate destruction can have troubling results. It can give the company emerging from bankruptcy protection a better position relative to its unindicted competitors than fair play should allow.
In sports, for example, no referee deliberately allows a team to gain an edge by playing outside the rules. Any gain by a foul is wiped away. To deter more disbehavior the victim is given a temporary benefit or advantage.
So it is particularly graveling that WorldCom (aka MCI) will fly out of bankruptcy with a judicial blessing to drop cargo amounting to $35 billion of debt. This puts the nation's second biggest provider of long distance and other communications services in far better position to increase its technology investments and compete for precious market share.
No wonder principal rivals AT&T and Sprint wonder whether they are the ones being penalized.