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American Morning
WorldCom Fall Out, Layoffs Expected Today
Aired June 28, 2002 - 07:31 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: As we have been reporting here, Xerox the latest corporation now to get caught in a multi-billion dollar accounting scandal.
There is still, though, plenty of fallout from the WorldCom scandal, a $4 billion wrong number revealed a few days ago. Thousands of employees, about 17,000, seeing pink today, and a few executives there will be getting something else, a congressional subpoena.
Today's layoffs the first in a series that will total about 20,000 of the company's work force worldwide. As we mentioned earlier, that number may go higher.
Tim O'Brien outside one of the company's divisions now in Arlington, Virginia -- Tim, reaction there?
Good morning.
TIM O'BRIEN, CNN CORRESPONDENT: Good morning, Bill.
Well, it is, of course, a dark and gloomy morning here in Arlington. We're at an MCI office building. MCI, of course, one of WorldCom's largest subsidiaries. The SEC is charging this company with civil fraud, that company executives cooked the books to show short-term gain but really caused long-term pain for WorldCom families, WorldCom employees.
Many of the employees arriving at work this morning did not want to speak to us. Most said they didn't know what lies in store for them, whether they still had their jobs. They expect there could be a great deal of pain, but there is already a great deal of uncertainty.
One employee did speak to us and he put it this way.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: It's just very, very sad how a few people can hurt so many people when we do have a lot of good managers, as well. But it's just very, very sad that people can do that without a conscience and, you know, it hurts me and it's going to hurt a lot of other people. There's a lot of anxiety around right now, as well.
(END VIDEO CLIP) O'BRIEN: Sad, indeed, and there is outrage in Washington on Capitol Hill. The president has spoken out about this several times, what it does for confidence in U.S. markets, the need for reform. The House Financial Services Committee has already, very quickly, subpoenaed the current chairman, the former chairman, the chief financial officer of WorldCom.
They're set to testify, or at least being asked to testify July 8 at a hearing here in Washington. Surely their lawyers will advise them to take the fifth amendment. It is another big controversy, another big scandal that appears to be unfolding.
And it's not just the employees who are hurting, also, Bill. It's investors. A year ago this stock was trading at around $60 a share. It closed this week at around $0.25. A great deal of pain all around and nobody really knows right now how far that pain will extend -- Bill.
HEMMER: Indeed, you're right, Tim.
On the legal side, again, you touched on what's happening in Congress. But many critics are saying that although we see these cases of major fraud, nobody pays a price.
At the Department of Justice, where are they moving right now?
O'BRIEN: Well, the Department of Justice is on top of this case, based on my sources at Justice. And there's a very real belief here that this will go beyond any suggestion of civil fraud to criminal fraud and possible prison terms for those responsible. Now, that's premature to predict, but that's where the thinking is now.
HEMMER: Yes, and there also is a big price to the nation's economy, with people from overseas and companies and businesses losing confidence and trust in the American system, Tim.
O'BRIEN: Oh, that's huge. That's huge. And the president has acted, saying that this is not representative of how American industry and how the American economy works. But there's a great deal of questioning overseas whether the U.S. economy is a good place to invest. And certainly Congress is going to be quick to try to restore that confidence. But it could be an uphill fight.
So the markets were down and there's a great deal of uncertainty about not only the markets, but the confidence that other countries and other investors can place in U.S. companies.
HEMMER: Thank you, Tim. Tim O'Brien in Arlington, Virginia this morning.
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