Shocking story about former WorldCom CEO
This shocking Wall Street Journal story (subscription required) details the incredible story of how Bernard Ebbers, the former CEO of MCI WorldCom went on an personal acquisition spree with bank loans thanks to the lessons he had learnt building WorldCom.
Ebbers grew up in Canada and the seeds of WorldCom were sown when he quit his job teaching high school and started buying motels, owning eight properties by the early 1980s. "Mr. Ebbers's big move came when he joined forces with other motel investors and formed Long Distance Discount Service, which eventually was renamed WorldCom" and Ebbers began to apply those same lessons to his personal empire.
Bank of America ponied up $253 million. Citigroup lent Mr. Ebbers $552 million. To help Mr. Ebbers pay back some of those loans, the WorldCom board lent him $415 million from the company's coffers. The bank loans went to fund a jumble of acquisitions, including timberland, a yacht-building company and a refrigerated trucking firm. Mr. Ebbers planned to manage the companies when he retired from WorldCom.
...Throughout Mr. Ebbers's shopping spree, there were evident flaws in his strategy. He sometimes snapped up properties at inflated prices, leaving bankers and WorldCom directors scratching their heads. Over the course of less than a decade, he secured a total of more than $1.3 billion in loans. Although he sometimes retired old debt with new, it is still a staggering amount for an individual. Mr. Ebbers took out those loans at a dizzying pace. But rather than tightening their purse strings, the banks kept lending him money.