CONTACT: Joshua Rosenberg
Director, NMRC
202.263.2940
joshua@newmillenniumresearch.org
EXPERTS DEBATE BANKRUPTCY POLICY
MANY WORRY SCANDAL-PLAGUED WORLDCOM WILL BE REWARDED
For Release September 27, 2002
WASHINGTON, D.C., September
27, 2002 – If companies such as WorldCom are
allowed to emerge from bankruptcy and are cleansed of all
debts, their competitors may find themselves shouldering the
financial burden, according to some experts who participated
today in a National Press Club roundtable sponsored by the
New Millennium Research Council (NMRC).
The NMRC event, "A WorldCom Phoenix: Is
Bankruptcy a Tool for Competitive Advantage?"
featured David E. Lynn, attorney with Docter, Docter
& Lynn; Shing Yin, senior analyst at the
telecommunications consulting firm, RHK, Inc.; Janice
Aune, president and CEO of Onvoy, Inc., a leading
Minnesota telecommunications provider; and Todd J.
Zywicki, associate professor of law specializing in
bankruptcy and contracts at George Mason University. David
Lachmann, Minority Professional Staff with the House
Judiciary Committee, moderated the event.
"We are seeing industry
giants come out of bankruptcy in a position to dominate the
telecom world. Debt loads have been erased or reduced, while
relationships with their customers are largely or entirely
unchanged," said Aune. "We need to be asking
the question: What will compel these companies to behave
differently after they emerge from
bankruptcy?"
David Lynn discussed
the right of all companies, including WorldCom, to use the
bankruptcy process when necessary. According to Lynn,
"Chapter 11 [bankruptcy filing] serves an extremely
useful and very much needed purpose. While individuals that
violate the law should be punished, corporations that can
avail themselves of the bankruptcy process should be
permitted to do so."
In contrast, analyst
Yin said: "WorldCom's irresponsibility and
corporate malfeasance should be punished, not rewarded.
Rescuing the company hurts its honest competitors, sending a
dangerous message to the market. Not to mention there may
also be more rot to find at WorldCom."
In closing, associate
professor Zywicki noted, "The WorldCom case
exposes the flaws in the corporate bankruptcy process, which
may require some significant change. Bankruptcy should be
used for a 'fresh start,' not as a means of getting a
leg up on the competition."
"Today’s event
addressed a timely and important policy issue," said
Joshua Rosenberg, Director of the New Millennium Research
Council. "We were able to hear a variety of perspectives
on how bankruptcy may have unintended consequences,
especially with WorldCom and its potential for enormous
impact on a telecommunications industry that is already
hurting."
About the
NMRC
Established in 1999, the
New Millennium Research Council (NMRC) is composed of a
network of policy experts who seek to develop workable,
real-world solutions to the issues and challenges confronting
policymakers. Its work has focused primarily in the fields of
telecommunications and technology. For more information on
the NMRC please visit:
http://www.newmillenniumresearch.org
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