World Com
September 6, 2014
Shannon Troutman
Discussion 2.1: American Greed: Inside the WorldCom Scam
Title:
Pointing the Finger
Question:
The corporate scandal involving WorldCom regrettably illustrates improper cost transfers designed to achieve higher profit levels. WorldCom did not transfer the cost from leases from the balance sheet to the income statement as quickly as they should have. This had the effect of overstating assets on the balance sheet and net income on the income statement.
Please watch this section of American Greed: Inside the WorldCom Scam: http://www.screencast.com/t/zBXF74I1sao
You can watch the entire documentary here: http://www.hulu.com/watch/46554, but this is not needed for the discussion.
Please discuss the following point: Cynthia Cooper (not shown in the clip) and her colleagues (for example, gentleman talking about the fraud) worried about their revelations bringing down the company. Her boss, CFO Scott Sullivan, asked her to delay reporting her findings for one quarter. She and her team did not know for certain whether this additional time period might have given Sullivan time to "save the company" from bankruptcy. Assume that you were a member of Cooper's team. Discuss the decision-making situation. Focus on how employees should react when ordered by their employer to do something they do not believe in or feel uncomfortable doing.
Answer:
Ideally, the conversation on whether or not to withhold findings for one quarter would start with the question, “Why?” This would lead to research on how money was being reported in the books and as a result, the team would have found that WorldCon was substantially overstating their profits by writing off the phone-line leases as a capital expense instead of an operating expense. Cooper’s team then would be left with a decision, to hold back on findings, which would falsify the records, or to reject Sullivan’s request and potentially bring the company down?
As a member of Cooper’s team, I would
Shannon Troutman
Discussion 2.1: American Greed: Inside the WorldCom Scam
Title:
Pointing the Finger
Question:
The corporate scandal involving WorldCom regrettably illustrates improper cost transfers designed to achieve higher profit levels. WorldCom did not transfer the cost from leases from the balance sheet to the income statement as quickly as they should have. This had the effect of overstating assets on the balance sheet and net income on the income statement.
Please watch this section of American Greed: Inside the WorldCom Scam: http://www.screencast.com/t/zBXF74I1sao
You can watch the entire documentary here: http://www.hulu.com/watch/46554, but this is not needed for the discussion.
Please discuss the following point: Cynthia Cooper (not shown in the clip) and her colleagues (for example, gentleman talking about the fraud) worried about their revelations bringing down the company. Her boss, CFO Scott Sullivan, asked her to delay reporting her findings for one quarter. She and her team did not know for certain whether this additional time period might have given Sullivan time to "save the company" from bankruptcy. Assume that you were a member of Cooper's team. Discuss the decision-making situation. Focus on how employees should react when ordered by their employer to do something they do not believe in or feel uncomfortable doing.
Answer:
Ideally, the conversation on whether or not to withhold findings for one quarter would start with the question, “Why?” This would lead to research on how money was being reported in the books and as a result, the team would have found that WorldCon was substantially overstating their profits by writing off the phone-line leases as a capital expense instead of an operating expense. Cooper’s team then would be left with a decision, to hold back on findings, which would falsify the records, or to reject Sullivan’s request and potentially bring the company down?
As a member of Cooper’s team, I would