Marketplace: News Archives

Wednesday, August 28, 2002
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It's Wednesday the 28th of August. I'm David Brancaccio.

Some $7.7 billion in accounting fraud can draw the attention of the legal system. Today, a federal grand jury indicted phone and data company WorldCom's former CFO Scott Sullivan. Also facing securities fraud and other charges is Buford Yates, a former WorldCom accounting executive, who allegedly helped cook the books. Marketplace Bob Moon has the story.

Moon: "Neither of the men named in the indictment, nor their attorneys, could immediately be reached for comment. Sullivan's lawyer has previously called his client the victim of a 'rush to judgment,' but the former CFO himself was tight-lipped when members of Congress tried in vain to question him last month:"

Congressman Gary Ackerman: "What I would like to know, is a simple question: Do you sleep well at night, Mr. Sullivan?"

Scott Sullivan: "Congressman, based on the advice of counsel, I respectfully decline to answer the question, based upon my Fifth Amendment rights to the U.S. Constitution."

Moon: "The grand jury indictment was unsealed in federal court here in Manhattan today, after an apparent breakdown in plea negotiations between Sullivan and prosecutors. The Wall Street Journal reports Sullivan resisted a plea offer because it would entail admitting to charges that would result in substantial prison time. Federal guidelines call for 10 years or less.

The new court papers name two other accounting executives as unindicted co-conspirators. Prosecutors signaled that those two, along with WorldCom's former controller David Myers, are cooperating with investigators. Washington attorney Stephen Ryan, a former federal prosecutor, says the threat of prosecution may have convinced them to plea bargain:"

Ryan: "An individual who obtains a plea bargain may also be the first one in the door. Often times, the government will come to a subordinate set of people and say, 'We don't care which one of you comes in, but the first one in will get this deal, and then everybody else will get no deal. And, so, that puts a great deal of pressure on people to cut a quick agreement with the United States."

Moon: "The indictment comes amid reports prosecutors had been seeking plea deals with Sullivan, and others, in hopes of building a case against former Chief Executive Bernard Ebbers. His lawyers have said Ebbers had no knowledge of the accounting decisions in question.

In New York, I'm Bob Moon for Marketplace."

There's a new federal rule that goes into effect tomorrow requiring senior company executives to certify the accuracy of their financial reports. The big Securities and Exchange Commission deadline 2 weeks ago involved only the biggest of companies and applied to last year's results. The new rules cover future quarterly and annual statements, and apply to all publicly traded companies, both domestic ones and foreign companies that trade stock on American exchanges. Many foreign companies want an exemption, and the pressure for that is being felt the strongest in Germany. From the Marketplace European desk in London, Stephen Beard reports.

Beard: "The German Justice Minister was sharply critical of the United States today. In an interview in Berlin, she said: 'What disturbs us here in Europe is that we are supposed to act as if the American Way is sacred.'

The minister was reacting angrily to the news that new American corporate governance laws will apply to those German companies whose shares are traded in the U.S. There are 22 of them in all, including Daimler-Chrysler and Siemens. The German government and German businesses object to the new law on several grounds. They say that, specifically, requiring a CEO and CFO to vouch for his company's accounts conflicts with German company law. They regard the whole exercise as a kind of American imperialism. Stefan Richter of The Globalist in Washington says the Germans do not have a point:"

Richter: "While it's not exactly pleasant to have this law come down all the way across the ocean from the United States, because of accounting standards in the United States, at the same time, what needs to be assured is something that any good executive would want to attest to in the first place: that he or she presents good and accurate results."

Beard: "In spite of the German protest, opposition to the new law seems to be subsiding elsewhere in Europe. In Britain, which has more than 50 companies listed in the U.S., the mood now appears to be one of grumbling acquiescence. One senior UK executive said this week, 'It's the price we now have to pay to have our shares traded on the world's biggest stock market.'

In London, this is Stephen Beard for Marketplace."

A former Maryland State trooper named Kevin Knussman has been awarded more than $600,000 in damages for being unfairly denied family medical leave. He's the first person in the country to sue successfully using the federal law on this. From the Marketplace Work & Family desk, Stephen Henn has more.

Henn: "When Kevin Knussman asked for time off from work to take care of his newborn daughter, his superiors at Maryland's State Police headquarters told him to forget it. Men, they said, couldn't use the Family Medical Leave Act to take care of a baby."

Knussman: "When I protested, she said quote, 'God made women to have baby's,' and until I could breast feed a baby, there was no way I could be a primary care provider."

Henn: "According to Joan Williams, a law professor at American University, not only were Knussman's employers flouting the Family Medical Leave Act, which applies equally to both men and women, they were also running afoul of federal civil rights law which forbids sex discrimination."

Williams: "When people think about gender discrimination today in the workplace, they tend to think of sexual harassment, or of glass ceiling problems."

Henn: "But according to a study Williams released today, more and more parents are suing employers who treat men and women differently when they start families."

Williams: "One company has actually been sued three times by three different mothers -- one plaintiff was awarded $3 million, and another case was settled for $495,000."

Henn: "Putting off a promotion because of a pregnancy -- telling a new mom that she has to chose between a career and a family or assuming a man won't take time off to care for a baby -- have all gotten employers into deep trouble.

Williams says she hopes Knussman's victory, along with her research, set off alarm bells in corporate suites all over the country, and put executives on notice that they can no longer can get away with treating moms and dads differently in the workplace.

In Washington, I'm Stephen Henn for Marketplace."

The stock market can sometimes be a mysterious place. As Boeing machinist's union is recommending members reject the aerospace giant's contract offer, the company's shares closed up 1.33 percent.

Sometimes stock movements are less mysterious. Today, shares in United Airlines fell more than 15 percent after Credit Suisse First Boston put the odds the airline will seek bankruptcy protection at 70 percent.

And, that's the top of our news for Wednesday. Today the Dow fell 130 points, 1.5 percent. The NASDAQ fell 33 points, 2.5 percent. Details when we do the numbers.

Music Bridge: I Need Your Touch - Cake

Rundown

Financial Planners
Part financial guru, part commiserating bartender, the role of financial planners has changed with the ups and downs of the market. Marketplace Business Editor Cheryl Glaser looks at how business has changed for the people that people trust with their money.

Music Bridge: Soul For Hire - Elvis Costello

Bait & Switch
There's no such thing as a good deal -- most come with strings attached. That's the point of view of dueling commentators Ian Ayres and Barry Nalebuff, who banter about what they say is more and more consumer back-end price gouging. As businesses stand to make a pretty penny from penalty charges to consumers, Ayres and Nalebuff call for more disclosure about true costs.

Cyber-Smokes
Sky-high cigarette taxes, a clamoring public, the Internet, and a loophole in the sovereign status of Native American reservations -- add them all up and what you get is an e-business made in smoker heaven. Reporter Melinda Penkava explores the booming tax-exempt Internet enterprise spreading among tribes, and the costs of circumventing state tax laws.

Indian Smokes
The booming cyber-cigarette business catching on among a growing number of native American tribes makes at least one man cringe. Commentator Joe Honig says its bad for more and more American Indians lighting up, and bad for states' financial health too.

Music Bridge: Smoke - Cornelius

Look Ahead
Coming up on Marketplace: The battle is on for the chance to host the 2012 Summer Olympic Games.