Big-buck scandals smack small-town America

Until WorldCom's accounting scandal started drawing federal investigators and media hordes, the biggest controversy here was whether the town would bend to state pressure and up the speed limit on its main drag – better known to locals as a costly speed trap.

But WorldCom, the telecommunications giant that put this little Southern town on the big-business map, laid off 17,000 employees last week as it admitted that it had improperly accounted for $3.8 billion in expenses.

The WorldCom scandal has now put Clinton on another kind of map – that of corporate fraud.

And, Clinton – population 23,347 – is just one in a growing number of small-town dots on that map. Corporate scandal – once seen largely as a big-city controversy – is intruding on these peaceful paradises.

Adelphia Communications, the cable-television giant now in bankruptcy after $3 billion of questionable activity, is based in Coudersport, Pa., population 2,650. Tyco International, a huge conglomerate whose former CEO just received his second indictment – has its US headquarters in Exeter, N.H., home to13,309.

They are places with smiling faces and uncomplicated lives, where children still set up lemonade stands and the main topic around town is whether the high school team will make the state tournament. They're the kind of places where everyone knows everyone else – for better or worse. The kind of places CEOs want to raise their children.

So when camera crews come to town to chronicle severe business misdeeds, it is a rude shock.

"There has to be wretched disappointment," says David Heenan, author of "The New Corporate Frontier: the Big Move to Small Town USA." "It's like having someone in the family and then all of sudden finding out they are a black sheep."

Nowhere is this more evident than Clinton.

It's Wednesday evening and the streets are empty. Except for the American flags wafting in the sultry breeze along Clinton Boulevard, the only noticeable activity is the chirp of crickets in the dense pine thickets. It's prayer night in this bricked bedroom community – and it'll stay quiet until the churches let out, and everyone heads to the Dairy Queen.

As a the backdrop for WorldCom's rocketing fortune – and, now, its spectacular misfortune – Clinton's mood has definitely been tied to the company.

"It's the kind of place where you will find most everybody at the high school football game on Friday night, the soccer fields on Saturday, and church on Sunday," says Mayor Rosemary Aultman, who still owns WorldCom stock. Company stock reached a high of $64.50 in 1999 and was priced at 83 cents last Tuesday, when trading in the stock was suspended.

When WorldCom, the nation's second-largest long-distance provider, decided to move from nearby Jackson in 1998, the town was thrilled, she says. "To have a high-tech, cutting-edge company move here was just really exciting. The other part of it was that this was a Mississippi-grown company, so there was real pride in ownership."

Vic Ribeiro, a former hospital administrator, is taking a break from walking laps around the track at Mississippi College. He and his wife retired here after three of their four children chose to attend the Baptist school.

Mr. Ribeiro continually glances up at WorldCom's headquarters – a massive black building – in the distance, peeking up from its spot on the other side of the freeway.

"It's probably not going to hurt the economy much," he says. "But it's definitely going to hurt the town's pride. A lot of people think very kindly of Bernie Ebbers. But it's hard to believe that he didn't know what was going on."

Bernard Ebbers – known to everyone here as Bernie, whether they knew him or not – was almost a folk hero around town. He came to Clinton from Edmonton, Alberta, to play basketball for Mississippi College on scholarship and stayed to coach high- schoolers. After dabbling in various business ventures, he and several friends met at a coffee shop in Hattiesburg and used a napkin to sketch a plan for acquiring a long-distance telephone company during the 1980s era of the breakup of AT&T. The company, Long Distance Discount Service, grew to be the onlyFortune 500 company in the state.

Four years ago, WorldCom was the place to work in Mississippi, say a couple loading up their latest purchases in the parking lot of the local Wal-Mart.

The couple – one a current WorldCom employee, the other laid off from WorldCom – wouldn't give their names. They met at WorldCom, married, and settled in for what they thought would be a long, happy life in Clinton, a deeply religious town where the biggest crimes anyone can remember were car thefts and purse snatchings.

She says if she's laid off, "honestly, it would be a relief. You don't know from one day to the next if you are going to have a job or not." She'll be grateful to get out with a severance package.

Businesses that sprang up after WorldCom moved in are just as unsettled – though town officials say the economy is relatively diverse and won't be heavily affected by a potential meltdown of the company. At Hudgey's Restaurant, where Southern fried chicken and banana pudding are the specialties, waitress Paula Turner pours patrons' sweet tea.

"It will hurt, but we don't know what the full impact will be," says Ms. Turner, who still remembers the excitement over WorldCom's arrival. "People were buying homes here, eating out, and bringing a lot of money to town."

While there are a few new businesses that might feel the pinch, what's really going to hurt the town is the sour reputation of WorldCom.

"Bernie was a local celebrity," says Robert Schoenberger, a business writer for the Clarion-Ledger in Jackson, who's been following WorldCom for years. "It was a local boy done good kind of story. Many people remember him playing basketball and, next thing you know, he's running a giant telecommunications company. It was such a dramatic success story."

That's why many residents simply wouldn't let go of their stock, even though it has been clear for more than a year that things weren't going well.

"This was not like Enron, where people lost everything overnight," says Mr. Schoenberger. "The news has been so bad for WorldCom for so long. Those who lost money held on out of support of the company. "

It's hard for residents here to believe that Mr. Ebbers – a devoted Christian and big town booster – was to blame. Many still cling to the belief he didn't know what was going on.

That could be why the town isn't seething, but simply sad. Indeed, a group of young women emerging from the Wednesday prayer meeting at the Morrison Heights Baptist Church, say they haven't heard much anger or feelings of betrayal. They express genuine sadness that their beloved town is under such fire.

"It was almost like the community had taken ownership of WorldCom," says Cari Cade, who graduated from Mississippi College a few years ago and didn't want to leave the tight-knit community. She now commutes to Jackson for work.

"The community will feel some hurt economically, but Clinton will not die because of WorldCom," says Ms. Cade. "It existed before and will continue to do so after."

Other small towns with similar scandals may not be so fortunate.