The Justice Department Should Shut Down WorldCom

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When do we void an allegedly criminal enterprise? When do we decide that its mistakes were too disingenuous and used to get too much money for us to consider it a legitimate actor? When does the Justice Department finally decide to shut a company down?

I think the answer is, when we have evidence, dredged up by good reporting, of $7 billion in overstated profits, which is what we have from WorldCom (WOCEQ - commentary - Cramer's Take). That should pique the Justice Department. I mean, isn't that why it is called the Justice Department and not the "Status Quo" Department or something like that?

WorldCom never would have been able to expand as it did -- it couldn't have bought MCI, let alone made all those other acquisitions -- if it hadn't cooked its books for billions of dollars.

But right now, both the banks that are owed too much money and the vulture funds that have bought the bonds in bankruptcy are in there arguing that it is business as usual.

Right now, WorldCom is in the hands of the bankruptcy court, and the only thing that the judge is considering is the two-year business plan for the company. I think that's ridiculous. The Justice Department should be in there arguing, as it did with Arthur Andersen, that this company is riddled with felonious acts and should be treated as such. This is the moment for Justice to move, before WorldCom is given debtor-in-possession financing and the bondholders have a chance to dig in their heels and claim they should be running the company.

Why is this so important? Because in the end of the '90s, crooked schemes like those used at Enron and WorldCom almost ruined the game by breaking all of the rules. Consider it this way: If Verizon (VZ - commentary - Cramer's Take) or BellSouth (BLS - commentary - Cramer's Take) or SBC Communications (SBC - commentary - Cramer's Take) had played the game like WorldCom did, there would be no competition, because whichever company played with its accounting like WorldCom did would have wiped out all of the other companies -- it would have been that dominant.

We need to get this telecom business cleaned up and cleaned up now. We need to be sure that companies can't just make up financials, take in huge amounts of money and get away with it. We should start with the very simple act of the government petitioning to close WorldCom and split up its assets among the companies that played fair.

Then we can start rebuilding this industry before it gets wiped out and driven back into the age where the dial tone is in question.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. At the time of publication, Cramer was long Verizon. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Click here to get Cramer's book, "Confessions of a Street Addict."