WorldCom Fraud Case Essay - 2223 Words

In 1983, while in a small coffee shop in Hattiesburg Mississippi, Bernard Ebbers developed the business concept that would eventually become the second largest long distance telephone company in the United States, WorldCom (Romar and Calkins). In 2002, the company that Bernard Ebbers grew from the ground up declared the largest bankruptcy in United States history. The unethical and illegal accounting treatments that WorldCom participated in eventually led to the demise of the company and a new company, MCI, rising from the rubble of what was WorldCom. There were two main issues that provided pressure for the senior executives at WorldCom to commit fraud. WorldCom became the second largest long distance telephone company because of its†¦show more content†¦The acquisition on MCI provides just one example of how WorldCom’s senior management failing at meeting these merger and acquisition challenges. When a long-time WorldCom customer called one of the newly acquired MCI customer service centers, he was told that he was not a customer, and if he was, he had called the wrong office because the office he called only handled MCI accounts (Moberg and Romar). There is no doubt that WorldCom had significant talent in buying out competitors, but the company was clearly not up to the task of merging the companies (Moberg and Romar). â€Å"Dozens of conflicting computer systems remained, local systems were repetitive and failed to work together properly, and billing systems were not coordinated† (Moberg and Romar). The aggressive acquisition strategy that WorldCom was implementing was put into jeopardy in 2002 when the federal government refused to let WorldCom acquire Sprint (Moberg and Romar). This denial forced WorldCom to focus on creating value from their previously acquired companies that were already poor performing because the mergers were done so carelessly (Moberg and Romar). The second issue that provided the pressure for senior exe cutives to commit fraud was the sweetheart loans that were made to senior executives. Bernie Ebbers, the CEO of WorldCom was offered generous stock options and purchases (Moberg and Romar). This is not necessarily aShow MoreRelatedThe Case About Accounting Fraud At Worldcom1964 Words   |  8 Pagesthe analysis of the case about Accounting Fraud at WorldCom Group member: Weichuan Xu Miao zhou 1. What are the pressures that lead executives and managers to cook the books? Firstly, one of the pressure is the company’s goal that was made by the top executive Ebbers. There is an economic recession and the bubble collapse which make the conditions deteriorate in 2012. He thinks that the company should focus on being the NO.1 stock on Wall street rather than the company’s really good operationRead MoreAccounting Scandal of Worldcom940 Words   |  4 PagesMANAGERIAL ACCOUNTING WORLDCOM How did it cook the books? 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Shareholders, which1200 Words   |  5 Pagesas well as retirement benefits tied to WorldCom stock. Shareholders, which included many pension funds, lost billions of dollars. The California public-employee’s retirement system, the largest state pension fund in the country, sued in an attempt to regain some of the $580 million it lost in the WorldCom debacle (Ripley 6). The telecommunications industry suffered as well. Industry companies were competing against WorldCom under false pretenses. WorldCom was fraudulently stating its financialsRead MoreFraud : The Perfect Fraud Storm1420 Words   |  6 PagesStatement Fraud Option #2 The perfect fraud storm occurred between the years 2000 and 2002 involving two of the largest energy and telecom corporations in the United States: Enron and WorldCom. It was determined that both organizations fraudulently overstated assets, created assets from expenses or overstated revenues, costing investors billions of dollars and resulting in both organizations declaring bankruptcy (Albrecht, Albrecht, Albrecht Zimbelman, 2012). Nine factors contributed to fraud triangleRead MoreIndustry Specific Changes. The Telecommunications Industry1697 Words   |  7 Pagesproposals are approved on a case-by-case basis (Litan Noll 2004). During the 90s boom, Ebbers and LDDS Communications successfully expands through various acquisitions. By the time the 1996 Telecommunications Act is enacted, competition in the telecommunications industry soared. After the successful acquisitions of MFS Communications and UUNet Technologies, the newly formed WorldCom offers long distance, data communication, and local services. In 1997, WorldCom successfully acquires MCI CommunicationRead MoreDo Big Companies Take So Much From Each Other?1328 Words   |  6 Pagessubsidiary of Verizon Communications. In the article World-Class Scandal At WorldCom by David Hancock he discusses how â€Å"The corporation was formed as a result of the fusion of WorldCom and MCI Communications corporations, and used the name MCI WorldCom for a while and was succeeded by the WorldCom Company, before changing its name on April 12, 2003, as part of the corporation s ending of their bankruptcy status.† WorldCom Inc. began as a small Mississip pi telephone service provider of long distance