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    Worldcom

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    WorldCom was a major telecommunications company that grew rapidly in the 1990s through acquisitions. However, in 2002 it was revealed that WorldCom had fraudulently misreported over $3.8 billion in expenses by improperly classifying them as capital expenditures. This led to the collapse of WorldCom and loss of billions in investor wealth. Several WorldCom executives were charged and convicted for their role in the accounting fraud scheme, including CEO Bernie Ebbers who was sentenced to 25 years in prison. The scandal shook investor confidence and led to increased regulation of auditors and accountants.

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    Worldcom

    Uploaded by

    api-308703671
    267 views12 pages
    WorldCom was a major telecommunications company that grew rapidly in the 1990s through acquisitions. However, in 2002 it was revealed that WorldCom had fraudulently misreported over $3.8 billion in expenses by improperly classifying them as capital expenditures. This led to the collapse of WorldCom and loss of billions in investor wealth. Several WorldCom executives were charged and convicted for their role in the accounting fraud scheme, including CEO Bernie Ebbers who was sentenced to 25 years in prison. The scandal shook investor confidence and led to increased regulation of auditors and accountants.

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    WorldCom was a major telecommunications company that grew rapidly in the 1990s through acquisitions. However, in 2002 it was revealed that WorldCom had fraudulently misreported over $3.8 billion in expenses by improperly classifying them as capital expenditures. This led to the collapse of WorldCom and loss of billions in investor wealth. Several WorldCom executives were charged and convicted for their role in the accounting fraud scheme, including CEO Bernie Ebbers who was sentenced to 25 years in prison. The scandal shook investor confidence and led to increased regulation of auditors and accountants.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    267 views12 pages

    Worldcom

    Uploaded by

    api-308703671
    WorldCom was a major telecommunications company that grew rapidly in the 1990s through acquisitions. However, in 2002 it was revealed that WorldCom had fraudulently misreported over $3.8 billion in expenses by improperly classifying them as capital expenditures. This led to the collapse of WorldCom and loss of billions in investor wealth. Several WorldCom executives were charged and convicted for their role in the accounting fraud scheme, including CEO Bernie Ebbers who was sentenced to 25 years in prison. The scandal shook investor confidence and led to increased regulation of auditors and accountants.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    WorldCom:

    Corporate Fraud

    WorldCom Background
    Huge telecommunications company
    Largest in the U.S after AT&T.
    Telecommunications giant
    Provided:
    Internet Services
    Long Distance and various other
    phone services for a cheaper
    price than competitors.
    2

    WorldComs Ascension
    WorldComtook the telecom industry by storm when it
    began a frenzy of acquisitions in the 1990s.
    From 1995 until 2000, WorldCom purchased over sixty
    other telecom firms. In 1997 it bought MCI for $37
    billion.
    WorldCom moved into Internet and data
    communications, handling 50 percent of all United
    States Internet traffic and 50 percent of alle-mails
    worldwide.
    By 2001, WorldCom owned one-third of all data cables
    in the United States. In addition, they were the
    second-largest long distance carrier in 1998 and 2002.
    4

    THE SCANDAL
    They classified over $3.8billion in
    payments for line costs as capital
    expenditures rather than current
    expenses.
    Irregularities in the reserve
    accounts.
    SEC claims that the total for
    fraudulent accounting comes to $9
    billion dollars.
    5

    WorldComs fall
    The company began to fall in 1999
    with massive lay offs and the steady
    decline of its stock price.
    Stock prices for WorldCom were
    around 60 dollars and dropped to
    pennies in 2002 giving sleepless
    nights to investors.
    Business sector mergers were
    unsuccessful.
    6

    The stock price had fallen from around 60$


    in 1999 to $1 in 2002
    7

    Upper Management

    Chief Financial Officer Scott Sullivan and


    Controller David Myers arrested.
    Myers pleads guilty to three counts of
    conspiracy
    Chief Executive John W. Sidgmore steps
    aside from his post
    Buford Yates Jr. pleads guilty to two counts
    of securities fraud and conspiracy
    Betty L. Vinson and M. Normand, former
    finance officials, are charged with conspiracy.
    Six other WorldCom directors resign on
    December 18th
    8

    Government Involvement

    Despite conspiracy charges and uncovered


    financial fraud the government still keeps
    WorldComs eligibility to file for
    bankruptcy.
    The U.S. gives $2 billion dollars in assets to
    tap.
    $20 million dollars over the span of three
    years given to new CEO
    WorldCom still allowed to oversee
    government projects

    Impact
    Overall investor distrust with
    companies undergoing similar
    problems.
    National feeling that the stock
    market is not as safe as previously
    thought.
    SEC forced to keep a closer look
    on auditor and accountant dealings.
    10

    Post-Fraud Happenings
    WorldCom was renamed MCI in 2004
    when it emerged from bankruptcy.
    Company could spin off several
    business units.
    Added additional board members to
    serve on a special investigative panel
    to review accounting practices.
    WorldCom may write off $50.6 billion
    in intangible assets.
    WorldCom is trying to secure loans.
    17,000 jobs cut to save $1 billion.
    11

    Ethical Values Violated

    Unethical Work Culture


    Pressurising employees to manipulate accounts
    No productive outlet for employee dissent
    Employees who played along were rewarded;
    others were threatened.
    Fudged up the accounts; mislead the various
    stakeholders

    BERNARD EBBERS
    Graduation & Doctorate
    from Mississippi college
    Build the biggest telecom
    industry in US within 15
    years.
    Bankrupt within 4 years
    Imprisonment of 25 years
    in charge of fraud.

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