Summary:

But while Rome was burning, the Neros were busy with their orgies. Money flowed like champagne at company events like the one in 1998, when about 60 to 150 people gathered for a long weekend at a castle a few miles away from Windsor Castle. It […]

But while Rome was burning, the Neros were busy with their orgies. Money flowed like champagne at company events like the one in 1998, when about 60 to 150 people gathered for a long weekend at a castle a few miles away from Windsor Castle. It was a weekend to build company morale and bring people from different companies acquired by WorldCom together. One executive who was there talks about senior executives climbing poles and breaking expensive croquet sets. Things got out of hand when some executives decided to go to London in a cab and moon the pedestrians!

Many such events took place in exotic locales like Mount Fuji, Japan; Phuket, Thailand; and Langkawi, Malaysia. “It was a great time, and everything else will be anticlimactic from this point on,” said one executive. Another reported that the Teatro Opera in Buenos Aires was rented for a private showing of “Les Miserables,” and a ballroom in Sao Paolo was rented for another WorldCom bash.

But the company didn’t have the money to pay for much of this. According to various shareholder lawsuits, the company would resort to double-billing, slamming customers, deliberately understating costs, and delaying customer credits for billing mistakes and payments to vendors. The cash situation at WorldCom was getting worse; the company’s cost-cutting measures weren’t always prudent: For instance, in 1999, WorldCom instructed its sales and marketing teams to stop buying research from research organizations such as Gartner Group and instead use information from research reports written by stock market analysts. It was a dumb move, because most corporations used market research to predict their competitors’ strategies and figure out what new product offerings could be hot sellers.

Chaos being the order of the day, it was evident to many insiders that the wheels were coming off the WorldCom express. Because of an influx of new competitors, the prices of bandwidth had been in a swoon and costs were simply going out of control. “Whenever I had discussions with planning and marketing (departments) they would hem and haw, complaining of cash flow problems. Everything was being done on credit, not cash,” recalled a senior company executive.

Adapted from Om Malik’s new book Broadbandits: Inside the $750 Billion Telecom Heist (John Wiley & Sons, $24.95) (http://www.broadbandits.org). Malik, a former senior editor at Forbes.com, and senior writer for Red Herring is now a senior writer for Business 2.0.

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