Worldcom Scandal
WorldCom Scandal
A summary of WorldCom fraud would include having to describe the greed that would eventually destroy one of the largest communications companies in the United States and world.
A humble motel owner, Bernard Ebbers took a small long distance company in 1983 and turned it into one of the most successful businesses in the country. It was not so much the business operations that caused the company to grow but the aggressive acquisitions that made the company grow. In its day, CEO Bernard Ebbers led the company through seventeen mergers and acquisitions, including the (at the time) largest ever with MCI in 1998 valued at $37 billion. Some credit the acquisition of MCI with the eventual downfall of the company since it was the decline in long distance services that caused the stock price to begin its decline. That is in fact what helped lead to the impending fraud that would almost cause the company to fail completely.
As the stock price began to fall chief financial officer Scott Sullivan, controller David Myers, and director of general accounting Buford 'Buddy' Yates began a scheme to make the company appear successful in order to keep the stock value up.
To do so they planned on misrepresenting the line costs by capitalizing the costs on the balance sheet instead of properly expensing them.
This would be followed up by inflating the revenue column by adding fake corporate unallocated revenue accounts.
With costs down and revenue up, the company appeared to be in great shape. An internal audit in 2002 would eventually uncover almost $4 billion in fraudulent accounting entries. Another more intensive audit would eventual discover $11 billion in fraudulent entries entered by the conspirators.
The summary of WorldCom fraud is simply a story centered on greed and nothing else. As the scandal began to truly unfold the company had no choice but to file for bankruptcy in 2002, becoming the largest corporate bankruptcy in history at that time (to be
A summary of WorldCom fraud would include having to describe the greed that would eventually destroy one of the largest communications companies in the United States and world.
A humble motel owner, Bernard Ebbers took a small long distance company in 1983 and turned it into one of the most successful businesses in the country. It was not so much the business operations that caused the company to grow but the aggressive acquisitions that made the company grow. In its day, CEO Bernard Ebbers led the company through seventeen mergers and acquisitions, including the (at the time) largest ever with MCI in 1998 valued at $37 billion. Some credit the acquisition of MCI with the eventual downfall of the company since it was the decline in long distance services that caused the stock price to begin its decline. That is in fact what helped lead to the impending fraud that would almost cause the company to fail completely.
As the stock price began to fall chief financial officer Scott Sullivan, controller David Myers, and director of general accounting Buford 'Buddy' Yates began a scheme to make the company appear successful in order to keep the stock value up.
To do so they planned on misrepresenting the line costs by capitalizing the costs on the balance sheet instead of properly expensing them.
This would be followed up by inflating the revenue column by adding fake corporate unallocated revenue accounts.
With costs down and revenue up, the company appeared to be in great shape. An internal audit in 2002 would eventually uncover almost $4 billion in fraudulent accounting entries. Another more intensive audit would eventual discover $11 billion in fraudulent entries entered by the conspirators.
The summary of WorldCom fraud is simply a story centered on greed and nothing else. As the scandal began to truly unfold the company had no choice but to file for bankruptcy in 2002, becoming the largest corporate bankruptcy in history at that time (to be