With Ruth Schuster
Forget Enron. This is the biggest accounting fraud the world has ever known, and it has stock markets the world wide dropping like flies.
Tel Aviv shares, soaring just the day before on the wings of President George Bush's pro-Israel speech, are sagging by 2%. Asian stocks had the wind knocked out of their sails and ended deep in the red, with Tokyo losing 4% to a four-month low, Hong Kong tumbling almost 2.5%, and South Korea down a whopping 7.2%. As the tsunami of selling swamped Asian stocks, the unnerved Bank of Japan intervened to stop the yen's advance against the dollar, to no avail.
European markets are open as of writing and they're taking a pounding. About the only green screens on the Tel Aviv Stock Exchange are members of the Tethys Sea oil exploration group, which announced a fat contract with the Israel Electric Corporation today.
Futures indicate Nasdaq losing a cool 4% today and the S&P-500 contracts point at a 2% dip, the dollar has shrunk to an all-time low against the euro
And it's all because of one company.
Communications company WorldCom (Nasdaq:WCOM), the cause of it all, shocked the markets, just as they thought they'd seen it all. Managing to inflate profits by $4 billion is no mean feat. The SEC, awed, said it had never seen accounting irregularities of that magnitude before.
The chastened WorldCom faces bankruptcy, and meanwhile has fired its chief financial officer, Scott Sullivan, and its accountant, after an internal probe found $3.8 billion improperly reported and unbooked in its balance sheet. The company will be restating its results for 2001 and for the first quarter of 2002, and shifting from black to blood-red.
The revelations led to a 75.9% crash in WorldCom stock after the bell as terrified investors fled for the hills.
Its auditors were none other than Arthur Andersen, by the way, the same firm that was brought to its knees by the Enron fiasco.