The Employee Benefit Research Institute's attempt early in July to put the WorldCom Inc. 401(k) debacle in perspective was appalling, especially coming from what is supposed to be a premier, independent and impartial research organization.
EBRI noted in a July 10 news release that only 0.3% of WorldCom's 401(k) assets were in the company's stock, "indicating that few WorldCom 401(k) participants had their retirement plan assets affected by the collapse of their employer's stock value." EBRI's release sourced the 0.3% to a Democrat Senate policy group report.
EBRI's flagrant underestimation of the relative value of losses suffered by WorldCom's 401(k) participants was palpably sloppy research from the Washington-based think tank and its president and chief executive officer, Dallas L. Salisbury, whose findings often are sought by policy-makers to support positions or quoted by the media to depict the state of pension benefit financing.
One could envision WorldCom participants choking when reading EBRI's misleading report.
WorldCom's chief executive officer, John Sidgmore, and a spokeswoman had been reported as noting only 3% or 4% of WorldCom's 401(k) assets were in company stock in early July.
In a report questioning EBRI's estimate, Mr. Salisbury defended the 0.3% EBRI reported, saying it is close to the figure cited by WorldCom.
After all the fraud attributed to WorldCom, should any objective analyst look to statements by officials of that company for confirming data? Those estimates for the WorldCom 401(k) plan were accurate - but only if you look at the value of WorldCom stock in early July, after the price had plummeted to a few cents a share from its high, as reported by Pensions & Investments, of $64.50 in 1999.
Mr. Salisbury, in an interview after the report of his statements, said after he was questioned about the accuracy of its estimate, EBRI immediately did further research and realized the number was grossly wrong and issued a revised news release within a few minutes. The revision noted 0.3% was a significant decrease from the 32% of WorldCom's 401(k) assets that were in the company's stock at the end of 2000 and 55% at the end of 1999. The revision went on to note the WorldCom 401(k) salary plan participants "appear to have lost between $600 million and $1.8 billion as the stock price declined."
Mr. Salisbury in the interview said the Senate group report was misleading and he was wrong to have relied on it. But what was EBRI doing using that research, anyway? Didn't Mr. Salisbury or other ERBI researchers read news reports of the financial devastation wreaked on WorldCom 401(k) participants? Employees wouldn't be upset about a 0.3% loss. Or what about the Pensions & Investments July 8 report stating that actually 40% of WorldCom's 401(k) assets were in the company's stock before the plunge in the price of the shares?
For EBRI to say "few WorldCom 401(k) participants had their retirement plan assets affected" was at least insensitive. Then again, how could EBRI come up with the revised figures so quickly, after the accuracy of the 0.3% was questioned? Certainly, Mr. Salisbury shouldn't trust numbers from officials at WorldCom of all companies, using them for confirmation of its own research, which was based only on another group's report.
Mr. Salisbury to his credit conceded the mistake, corrected the error and acknowledged the personal financial damage to the WorldCom 401(k) participants. But good estimates of the size of WorldCom's 401(k) losses would have been easy for EBRI to find, as Mr. Salisbury said EBRI staff belatedly discovered.
Until now, EBRI research has been regarded as credible and impartial. But in this case, EBRI dialed the wrong number for WorldCom.
