ompany succeed in the short run, enabling it to sell its stake to other investors at a profit. Investment bankers likewise have an interest in stirring up the maxi- mum interest for companies they are peddling. So they want a good "story." And successful entrepreneurs were often very good storytellers. But in complex industries like telecommunications, which are sensitive to both fast-moving technology and fast-changing regulation, it can be hard for even a professional investor to tell a good story from a cock-and-bull story. At the biggest financial firms, that role fell to the analysts. But while many worked hard for their once-sumptuous pay, some of them turned out to be rather honesty-challenged. This was not always their own fault: If a firm's stock brokerage arm employed an analyst to help its customers determine what stocks to buy, and its investment banking arm wanted business from companies whose stocks were being covered by the analysts, then the analysts were under pressure to please the companies, not their own customers. Best-known of these analysts in the telecom sector was Salomon Smith Barney's Jack Grubman, who famously kept his buy rating on WorldCom after the company's stock was mov- ing into free fall-and whose daughter got into a very selective preschool after he gave a suspiciously favorable report on AT&T. Salomon's parent company Citigroup ended up paying $2.65 billion to investors who invested in World- Com while Grubman was recommending it [1]. Some story indeed! WorldCom and the Limits to Mergers The accounting fraud that finally did in WorldCom was in large part tied to the complex regulatory system that applied to the domestic telephone industry. It had been booking access charges-the subsidy-laden payments it made to local Focusing on the Bottom Line exchange carriers for the use of their networks-as capital investments. This would have put a burden on future earnings, to be sure, but it enabled the com- pany to maintain its reported margins in the short term. Treating access charge