[Marxism] Life in corporate America

Richard Fidler rfidler at cyberus.ca
Wed Mar 9 09:06:06 MST 2005


Well, maybe I can placate Fred Feldman with the following notes in an 
investment advisor's newsletter today, one on a big investor doing what 
smart investors do, the other on a CEO whose defense is simply 
stupidity. These should appeal to Fred's self-professed "soft spot for 
really inspired scoundrels and maniacs". -- Richard

Martha Stewart is out of the can, but not exactly on the loose.

Like so many things in America in the 21st century, what seems to matter 
is the collateral, not the pertinent. Martha's "crime" was 
insignificant...she sold a stock she thought was going down. But no one 
seems a bit concerned that an ambitious prosecutor railroaded her. She 
might as well of been shut up in Guantanamo or sent off to Syria, where 
torturers could have beat a confession out of her. The news shows would 
still only want to know if her weight went down...or if her stock went 
up. Martha's a genuine celebrity now. And thanks largely to celebrity 
coverage of her stint in the Big House down in Pennsylvania, stock in 
the House of Stewart in New York rose from $10 to over $37, increasing 
Martha's personal holdings by $600 million. As far as we know, no one 
ever made more money while scrubbing toilets in the pen.

Who would buy stock in a money-losing media company, whose chief 
personality is doing a prison term? The same rubes who bought tech 
stocks in '99...and who now speculate in houses - mom and pop 
lumpeninvestors without a clue or a prayer...who have no business being 
in the stock market in the first place.

But while the public was bullish on Martha Stewart Living Omnimedia, 
private investors who knew what they were doing, have been dumping it 
for months. Barron's reports that insiders at the company sold 10 shares 
for every one they bought, while their honcho labored on heads.

Meanwhile, our Pittsburgh correspondent, Byron King, reports on Bernie 
Ebbers' efforts to stay out of the hoosegow:

"At his trial on Feb. 28 in New York, former Worldcom CEO, Bernie 
Ebbers, took the stand in his own defense. He denied that he knew 
anything about Worldcom's profits, revenues or other pertinent financial 
information. He delegated that to others, he testified. He denied that 
he knew about, let alone condoned, the financial fraud that is now 
apparent in Worldcom's business records. He was misled by his 
employees...

"Ebbers's attorney, Reid Weingarten, questioned Ebbers about his 
background. Ebbers testified that he had dropped out of two colleges 
before getting a degree in physical education. Then, he worked as a 
milkman, delivery driver and basketball coach. Finally, Ebbers said, he 
found work in the telecommunications industry, although he claims that 
he never understood the essentials of the business.

"When asked to reconcile his limited background and admitted lack of 
understanding of the inner workings of a complicated corporate business, 
Ebbers testified, 'I know what I don't know.'(Well, maybe he doesn't.)

"Ebbers testified, 'I don't know accounting...I am not up to date on 
technology...I was not technically competent to lead Worldcom for the 
indefinite future.'"

Ebbers' defense, in other words, is that he couldn't have intentionally 
misled anyone about the facts of Worldcom; he had no idea what the facts 
were!

But so what if he was ignorant of the telecom business?

We recall another telecom executive - Gary Winnick - head of Global 
Crossing. All the man knew about his business was what he had learned 
from watching a 30-minute video, describing how undersea cables were 
laid. Yet, his stock rose too - until the company was worth more than 
$50 billion.

The public loved Global Crossing as the stock reached more than $60 a 
share. But the insiders - notably, Winnick himself - knew when it was 
time to sell. He sold $735 million worth...just before the company went 
belly- up.

At least Winnick knew what business he was really in - stock promotion. 
But poor Bernie Ebbers seemed out of his league altogether. He forgot to 
sell.

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