VideoWhere will the companies get the cash? Not from current resources or operations, since the study singled out companies that don't have them, said Dominic DiNapoli, who supervises the consulting firm's restructuring practice. The companies, he thinks, might need to divert funds from reinvestments or shareholder distributions, or draw on bank lines of credit.
Pension Insurer Might Shy from Stocks
In other pension news, the federal corporation that provides a backstop for pensions could be changing its investment strategy. The Pension Benefit Guaranty Corporation (PBGC) is performing the first review of its investment strategy in a decade, according to the Financial Times.
At stake: PBGC's $26 billion investment portfolio—and maybe more. If the agency moves to a fixed-income strategy, pension fund sponsors might get the notion that PBGC thinks that stocks can't produce the returns needed to pay benefits, according to the FT.
Officials at PBGC, however, have reason for caution. For the fiscal year ended September 30, 2002, PBGC's insurance program for individual employers went from a surplus of $7.7 billion to a deficit of $3.6 billion. The loss was more than five times the size of any previous one-year loss in the agency's 28-year history. Based on the agency's midyear unaudited financial report, the deficit has grown to about $5.4 billion.
At the same time, PBGC isn't backed by the full faith and credit of the U.S. government and gets no federal tax dollars. Instead, the agency is funded by insurance premiums paid by defined-benefit pension sponsors, along with pension assets that PBGC recovers from bankrupt sponsors and earnings on its invested assets.
You can understand why officials of the PBGC want to take a fresh look at where they plunk down the agency's money.
Probing Bernard Ebbers's Voicemail
Talk about your irony.
While two detailed investigations have found that former WorldCom chairman and CEO Bernard Ebbers ran the company in a way that enabled other executives to commit fraud, he might end up not being hit with civil or criminal fraud charges himself, the New York Times reports.
The investigations—one by the bankruptcy court in New York overseeing WorldCom's debt negotiations and one sponsored by company directors—provide fresh evidence of Ebbers's intimate involvement in the WorldCom downfall, according to the newspaper. But lawyers quoted by the Times say it's still unclear whether Ebbers could be charged.
The reason? His apparent reluctance to use phone technology. Ebbers, who has reportedly denied all wrongdoing, did not use E-mail much at WorldCom and took few notes on his activities, investigators cited by the newspaper said. Moreover, prosecutors might also not be able to use voicemail left for Ebbers as evidence. Why? They may not be able to prove that he actually listened to his messages.
Scott Sullivan, the former WorldCom CFO, might not end up being so lucky. The WorldCom board reportedly presented evidence that the fraud at the telecom was largely directly by Sullivan. In a voicemail message Sullivan left for Ebbers, the ex-finance chief brooded about the number of unusual items being booked as revenue, calling them "accounting fluff," according to the Times.
Apparently Ebbers did send a note to WorldCom's chief operating officer, telling him to "see where we stand on those onetime events that had to happen in order for us to have a chance to make our numbers."
Management at WorldCom, which is in the process of changing its name to MCI, has said that the overall amount of the restatements for 1999, 2000, 2001, and the first quarter of 2002 could amount to more than $9 billion.
Sullivan has been charged with securities and bank fraud, and has pleaded not guilty to both charges. Ebbers's attorney told the Times that the findings of the two investigations didn't directly implicate his client. The newspaper said Sullivan's lawyers couldn't be reached for comment.
Reader Comments» Post a comment