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1. WorldCom:Corporate Fraud1 2. WorldCom BackgroundBernieEbbers is the founder of world com.Huge

telecommunications companyLargest in the U.S.Held responsible for waking up its

somewhat sluggish industry in the early 90s2

3. INDUSTRYTelecommunications giant Provided:Internet ServicesLong Distance andvarious other phone services for a cheaper price than competitors.3

4. WorldComsAscensionWorldCom took the telecom industry by storm when it begana frenzy of acquisitions in the 1990s. From 1995 until 2000, WorldCom purchased over

sixty other telecom firms. In 1997 it bought MCI for $37 billion. WorldCom moved into

Internet and data communications, handling 50 percent of all United States Internet

traffic and 50 percent of all e-mails worldwide. By 2001, WorldCom owned one-third of

all data cables in the United States. In addition, they were the second-largest long

distance carrier in 1998 and 2002.4

5. THE SCANDAL They classified over $3.8billion in payments for line costs as capitalexpenditures rather than current expenses.Irregularities in the reserve accounts. SEC

claims that the total for fraudulent accounting comes to $9 billion dollars.5

6. WorldComs fallThe company began to fall in 1999 with massive lay offs and thesteady decline of its stockprice. Stock prices for WorldCom were around 60 dollars

and dropped to pennies in 2002 giving sleepless nights to investors.Business sectormergers were unsuccessful.6

7. The stock price had fallen from around 60$ in 1999 to $1 in 2002 7 8. Upper ManagementChief Financial Officer Scott Sullivan and Controller David

Myers arrested.Myers pleads guilty to three counts of conspiracyChief Executive John

W. Sidgmore steps aside from his postBuford Yates Jr. pleads guilty to two counts of

securities fraud and conspiracyBetty L. Vinson and M. Normand, former finance

officials, are charged with conspiracy.Six other WorldCom directors resign on

December 18th8

9.Government Involvement Despite conspiracy charges and uncovered financial fraudthe government still keeps WorldComs eligibility to file for bankruptcy.The U.S. gives

$2 billion dollars in assets to tap.$20 million dollars over the span of three years given

to new CEOWorldCom still allowed to oversee government projects9

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10. Impact Overall investor distrust with companies undergoing similarproblems.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.10

11. Post-Fraud Happenings WorldCom was renamed MCI in 2004 when it emergedfrom bankruptcy.Company could spin off several business units.Added additional

board members to serve on a special investigative panel to review accounting

practices.WorldCom may write off $50.6 billion in intangible assets.WorldCom is trying

to secure loans.17,000 jobs cut to save $1 billion.11

12. CONCLUSIONIn a way this proves some of the negligence of the government.With so much financial fraud going on at the time in huge multi-billion dollar

corporations, investors would have suspected a little better job at finding problems in

the system. Accounting practices like these not only install distrust in financial

institutions but also in government factions like the SEC that were created and funded

for the sole purpose of preventing things like this from happening.