WorldCom:
Corporate Fraud
Amanda Barnes
Catherine Collins
Lamar Jamison
WorldCom Background
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Huge telecommunications company
Largest in the U.S.
Held responsible for waking up it’s
somewhat sluggish industry in the
early 90’s
Industry
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Telecommunications giant
Provided:
– Internet Services
– Long Distance and various other phone
services for a cheaper price than
competitors
WorldCom’s Ascension
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AT&T monopoly break-up
CEO Bernie Ebbers repackages
leftovers and sells them at a bargain
price.
Broadened services available.
WorldCom’s Ascension
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75 mergers and acquisitions of smaller
companies.
Bought competitor MCI.
Attempted to buy Sprint in 2000.
Anti-trust regulations wouldn’t allow
Sprint acquisition.
WorldCom’s Fall
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The company began to fall in 1999
with massive lay offs and the steady
decline of it’s stock price.
Stock prices for WorldCom were
around 60 dollars and dropped to
pennies in 2002.
Business sector mergers were
unsuccessful.
Stock Price
Bernie Ebbers
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Founder of
WorldCom
Aggressive
businessman who
seemed to be the
fire for WorldCom's
success.
Fed new ideas into
the company for
expansion
Bernie Ebbers
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Resigned after allegedly using funds
from his company to cover his losses
from his stock holdings
This brought into question the
supposed “earnings” for WorldCom's
2002-2004 fiscal years.
Various Scandals
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Many companies under the eye of the
government after financial scandals
such as Enron surfaced.
WorldCom watched closely because of
it’s shaky future outlook
Accountants everywhere under
speculation at major corporations.
Financial Accountants
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Accounting firms and auditors for
companies are in charge of a
company’s financial reports.
They must know the federal
regulations for reporting earnings and
such so that no figures are
misrepresented.
Accounting

Help companies answer these
questions:
– how much they made
– how much they can save
– how much they should pay in government
taxes
– how much they can use for other things
(expansion, dividends, etc.)
The Scandal
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In July 2004, Congress is notified by
Scott D. Sullivan of financial mistakes
August 9th WorldCom’s auditors
uncover $3.8 billion dollars in improper
accounting
SEC claims that the total for fraudulent
accounting comes to $9 billion dollars
and dates back to 1999.
The Scandal
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Banking firm awards WorldCom execs
with IPO stock based on the false
earnings they reported.
WorldCom executives reaped massive
gains from these IPO stocks.
Both Bernie Ebbers and Scott Sullivan
received shares.
Upper Management
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Chief Financial Officer Scott Sullivan and
Controller David Myers arrested.
Myer’s 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
Upper Management
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Betty L. Vinson and M. Normand,
former finance officials, are charged
with conspiracy.
Six other WorldCom directors resign
on December 18th
Government Involvement
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Despite conspiracy charges and
uncovered financial fraud the
government still keeps WorldCom’s
eligibility to file for bankruptcy.
The U.S. gives $2 billion dollars in
assets to tap
Government Involvement
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$20 million dollars over the span of
three years given to new CEO
WorldCom still allowed to oversee
government projects
Impact on the Financial
World
Impact
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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
Employment
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WorldCom forced to lay off 17,000
workers in order to cut costs.
Another 3,000 expected to be cut in
the next few months
One employer is given a settlement
after suing the company for pain and
suffering and monetary loss.
Conclusion