By DAVID MOON, Moon Capital Management
At the beginning of last week's House Financial Services Committee hearings
into the WorldCom scandal, former WorldCom CEO, Bernard Ebbers made an opening
statement. 'I do not believe I have anything to hide in these or any other
proceedings.' He then spent the next eight hours refusing to say anything,
other than invoking his Fifth Amendment right to hide information that might
My first reaction was to root for the congressmen. Ebber's hubris was
damning. I liked watching our elected legislators standing down the
rascals who turned $ 183 billion of WorldCom shareholder wealth into a stock
whose share price is now less than the price of a pay phone call.
But when I watched Maxine Waters, a representative from California, question
Salomon Smith Barney telecommunications analyst, Jack Grubman, my sense of
legislative pride began to fade. Unlike Ebbers, Grubman did not invoke his
Fifth Amendment rights. Waters, like most of the inquisitors, had no idea
what Grubman does for a living. Her questions made no sense.
My enthusiasm for the hearing was completely gone when I realized that the
congressmen generally had no idea what they were asking or how the industry
works. In fact, most of the time wasn't spent asking questions, but rather
making speeches ' I suspect hoping to produce a video clip that might be played
on 40 local television news shows that night around the country.
As the afternoon wore on, it became a silly spectacle. A congressman
would ask a question, usually awkwardly written by a congressional staffer with
no more knowledge about the industry than the congressman. Ebbers would then
read a short statement invoking the Fifth Amendment. Then the congressman
would scold him. Five hours later, another congressman would ask a
question and Ebbers would pull out the same little piece of paper and re-read
the same refusal over and over again. Did the 14th congressman to question
Ebbers think he would be the one to get Ebbers to break down and explain the
entire scandal? Did each of these guys these guys think they were going to
be the one to inspire a Perry Mason-ish confession?
To fully understand the spectacle, you have to be able to envision the
room. The congressmen are seated at an elevated platform, peering down
powerfully at their prey. The witnesses, usually accustom to the perks and
trappings of wealth and power, sit demurely in a hole, forced to peer up at
their inquisitors like school children looking up to a first grade
teacher. Or like a squirrel in the middle of a road, caught in the
headlights of a truck.
What frustrated me most was not the skeptical or the stupid questions or the
awkward confrontations ' although these did make for interesting
television. (It was like watching one of those car crash shows.)
Then it hit me; that is all the hearing was about: television. The US
Constitution doesn't give Congress police powers. They may be our elected
officials, but our founders had very specific ideas about the role of Congress;
acting as our nanny or head master wasn't one of them. Congress is
supposed to make laws. Committees are supposed to review bills and make
recommendations. They were doing neither in the WorldCom hearings.
Just because an action is good and just doesn't mean it is the proper role of
Congress. There are plenty of important and desirable activities that
government (or some branch of government) have no authority or justification
providing. We already have federal laws against lying to
shareholders. We should enforce them. Send the guilty parties to
jail; don't create a daylong press conference photo-op.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).