Worldcom Fraud

In: Business and Management

Submitted By MichaelHammer95
Words 614
Pages 3
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WorldCom, the United States second largest telecommunication company stunned the world by filing bankruptcy in July of 2002. The downfall of WorldCom did not just affect the employees, retailers, the government, but also the bankers. WorldCom was a multi-billion dollar telecommunications business that was founded in 1983. They started their business under the name ‘Long Distance Discount Services’ (LDDS) providing long distance telecommunication amenities.
In 1985, Bernie Embers became the company’s CEO, in 1995; the company changed its name to WorldCom. Throughout the 1990’s, WorldCom increases its growth through series of successful acquisitions and mergers. Nevertheless in the late 1999, WorldCom’s performance begins to decrease in due to the upward of overcapacity, competition, and reduced demand for telecommunication services at the start of the economic recession and the result of the dot-com bubble downfall.

All these burdens triggered WorldCom to become involved in accounting fraud and cook the books. WorldCom’s CFO Scoot Sullivan began the process of mismanaging as capital expenditure with what should have been normal expenses, therefore turning losses in profit, creating a camouflage that the company is carrying out well. Until June of 2002, things started to unravel and the company’s stock price plunged. Investigations were carried out and on June 25, WorldCom admits that it had inflated its earnings by $3.8 billion. After several investigations, total amount revealed from improper events raised to $9 billion causing WorldCom to file bankruptcy in July. Numerous top management employees were held responsibilities for the fraud like Ebbers, Sullivan, and Myers to name a few. This is a case where just like the previous case before, bad ethical decisions were made and it cost the company major dollars. They believed that the…...

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