After years of secrecy (to preserve the company’s competitive edge, we’re told), MLGW has finally released Memphis Networx’ financial statements for public scrutiny. No doubt, many interesting revelations will turn up in those pages, which document MLGW’s disastrous plunge into the telecom business.
Not that it matters anymore. Now that MLGW is on the verge of selling its $29 million investment for around $1 million, it’s too late to do much of anything but smack your skull and cry, “Oy!”
For anyone familiar with the history of confidence rackets, the tale of Memphis Networx offers a more-than-passing resemblance to “the Spanish Prisoner,” a classic con that originated in Europe during the Inquisition and which has since become quite popular among Nigerian e-mail writers.
The scam works like this: The con man endears himself to his mark by entrusting him with something that is allegedly of great value. He tells the tale of his friend, a generous nobleman, who has been falsely imprisoned by the king of Spain. The con man says he knows whose palms need greasing in order to release the nobleman, and he assures the mark that the rewards will be beyond imagining … but he’s broke. The rube ponies up some coin. After all, he’s got the valuable object as collateral. Unfortunately, the money the rube provides is never quite enough to spring the prisoner, and so the game continues until the rube gets wise or runs out of dough.
The metaphor isn’t perfect. By participating in a dubious public/private partnership that shut out public oversight and by hanging onto its worthless shares to the bitter end, MLGW played the dual role of rube and con man. It’s an object lesson that should remind us of why seeing where the money goes — when it’s going — is far more valuable than hearing about where it went.
It also reminds us just how empty and artificial modern “competitive” business practices can be. It is accepted that executives should receive big salaries, nice bonuses, and perks, even when they fail to grow the company’s bottom line. Networx played the game by the rules, rewarding its first-generation executives quite nicely, even though the company tanked. The taxpayers, of course, who represent the “public” side of this partnership, were denied access to the company’s numbers — until it was too late.
The private investors — including Memphians Fred Smith and Pitt Hyde — will be repaid at least a portion of their investment. Both of these men have done a lot for the city, and it’s likely they thought they were doing a good deed when they responded to MLGW’s overtures and attached their names to Networx. Their participation in the telecom venture was more symbolic than anything else, solicited primarily to create confidence in the venture. The real suckers in this deal — and unwittingly so — were the taxpayers.
Now we’re faced with a Hobson’s choice: We can either put more money into the venture, betting that Networx has finally turned the corner and that the fiber-optic infrastructure it has created will bear fruit, or get out and watch a private company reap the rewards of our public investment.
Oy.