Scandal Of Worldcom Scandal

He transferred funds from WHA to his personal bank account and other accounts he had access and control too. Richard understated the amount of unpaid payroll taxes of WHA and its subsidiaries and by overstating the amount of loans made by him to WHA. As a result the financial statements and records were manipulated. He also directed purchasers of new issued shares to transfer the funds of the shares to accounts under his control. Around $6 million was taken and spent. The market value of WHA and the earnings per share were also inflated and overstated as well. This happened because of Richard falsely giving records to the SEC, WHA shareholders, and perspective new purchasers of stock by understating the real number of outstanding shares in the company’s financial statements. World Health Alternatives lost $41 million in total from all of the fraudulent activity.

The following case is one of the most famous white-collar crime cases known to date. Enron Corporation was an American energy company based out of Houston, Texas. Kenneth Lay formed Enron in 1985 after a huge merger. Over time Enron’s Chief Financial Officer (CFO) and other corporate executives misled auditors and the board of directors in major financial transactions. Thus, $11 million dollars was lost by shareholders after Enron’s stocks dramatically fell in the end of 2001. Enron was then bankrupt. In this case, many Enron executives were sentenced to prison, a rare punishment for white-collar crime. As a result of this incident, the Sarbanes- Oxley Act was enacted. This act ensured that there would be

On June 17, 1972, inverstigators discovered that burglars hand intruded the Watergate Complex in Washington D.C. This burglary became known as the Watergate Scandal, in which, five member of Richard Nixons reelection campain broke into the Watergate Complex and stole many classified documents. The five memebers also wire tapped all of the phones within the complex to help gather extra classified information. Nixon denied any involvement in the burglary, but however, investigators began to uncover evidence that would soon link him to the scandal.

9. In March 2009, Madoff pleaded guilty to eleven counts of fraud, money laundering, perjury, and theft; in June 2009, Madoff was sentenced to 150 years in federal prison. 10. Fraud charges are still pending against David Friehling; he faces a prison sentence of more than 100 years if convicted of those charges. 11. KPMG became the first of the Big Four firms to be sued as a result of the Madoff fraud; the lawsuit alleges that KPMG failed to properly investigate Friehling & Horowitz while auditing the financial statements of a large “feeder firm” in which the plaintiff was an investor. 12. The SEC has announced a series of reforms to prevent or detect future frauds similar to Madoff’s; one proposal is that investment advisers be subjected to annual “surprise audits” to ensure that customer funds are properly safeguarded.

Bernie Ebbers, former chief executive officer of WorldCom/MCI, was convicted on nine counts of fraud, relating to the accounting functions of the company. Ebbers is currently serving twenty-five years in federal prison.

The company became successful through the process of buying over 65 assets, and enormous about of money spent. After the internet downfall the company stocks had increased, but putting the company into a lot of debt. Worldcom was soon to be discovered by wall street bankers, investors, etc. Later to become one of the second largest long distance telephone company in the United States. The accounting collapse didn't happen right away. However from the early 2000s Bernard Ebbers, and other employees used fraud and invalid accounting procedures to deceive investors and others. Some people saw it as an honor, until it was involved in one of the largest accounting crimes in American History, Worldcom led to bankruptcy. "WorldCom then admitted to inflating its profits by $3.8 billion over the previous five quarters. A little over a month after the internal audit began, WorldCom filed for bankruptcy.When it emerged from bankruptcy in 2004, WorldCom was renamed MCI. Former CEO Bernie Ebbers and former CFO Scott Sullivan were charged with fraud and violating securities laws. Ebbers was found guilty on all counts in March 2005 and sentenced to 25 years in prison, but is free on appeal." (Case Study: Worldcom, Lee Ann

The stakeholders in this fraudulent case of WorldCom consist of Bernie Ebbers, Scott Sullivan, Buford Yates, David Myers, Cynthia Cooper, and Betty Vinson belong to the company. While the other stakeholders would consist of the creditors, Andersen (accounting firm), investors, and the public. This fraudulent act committed within WorldCom impacted every single stakeholder in a way. Either in a negative or positive way, most of the impact was caused with harm to everyone. The main individuals such as Ebbers, Sullivan, and Vinson all had major consequences as resulting with the fraud. Criminal trials were a major result with their fraudulent acts within WorldCom. Cooper was a lifesaver by most of the community. Aside from these individuals, the rest also got affected by the fraud. Investments conducted by the investors were all lost within the fraud process. The impact towards much of the image for Andersen was ruined. Many of the public lost their trust on the honesty and professionalism of Andersen and other certified public accounting firms. The entire employees from the top management to the smaller group of workers stayed unemployed and some with criminal punishment.

Mr. Jeffrey Skilling was one of three executives at Enron Corporation that were indicted for manipulating financials to show the public inflated numbers about Enron’s profitability. By showing these numbers to the public they were trying to mislead the public into thinking the company was more profitable than it really was. Mr. Jeffrey Skilling was convicted by a Texas federal district court of conspiracy, securities fraud, making false representations to auditors, and insider trading. Mr. Skilling had been the C.E.O. of Enron Corp. Mr. Skilling appealed, he argued he was prosecuted by the government under an invalid legal theory and that the jury he had was biased.

In conclusion, Kozlowski and Swartz were both found guilty of breaking the law on different accounts, and receiving jail time as a part of their sentences was the correct punishment (Sorkin, 2002). These two men stole hundreds of millions of dollars from Tyco International through fraudulent claims, and used the money to pay for houses, apartments, events, and shopping expenses (Sorkin, 2002). Over the amount of time Kozlowski and Swartz were stealing from their company, they had a plan of how they were going to obtain extra profits, which was committing fraud and scamming the customers and company, and even the employees (Sorkin, 2002). It is important that large corporations, and even small businesses, do not oversee white-collar crime because

Before 2002, WorldCom was one of the top telecommunication businesses in its industry because of many acquisitions obtained by the company. Due to the increased popularity of the internet and the acquirement of UUNet and MCI

After Bernard Madoff, a former NASDAQ chairman, was arrested on December 11, 2008, he acknowledged that his performance was nothing but the Ponzi scheme. He pled guilty to the biggest investor fraud ever committed by anyone on March 12, 2009. On June 29, 2009, he was sentenced to 150 years in prison.

On March 15, 2005 former CEO of WorldCom, Bernard Ebbers sat in a federal courtroom waiting for the verdict. As the former CEO of WorldCom, Ebbers was accused of being personally responsible for the financial destruction of the communications giant. An internal investigation had uncovered $11 billion dollars in fraudulent accounting practices. Later a second report in 2003 found that during Ebber’s 2001 tenure as CEO, the company had over-reported earnings and understated expenses by an astonishing $74.5 billion dollars (Martin, 2005, para 3). This report included the mismanagement of funds, unethical lending practices among its top executives, and false bookkeeping which led to loss of tens of thousands of its employees.

WorldCom was the ultimate success story among telecommunications companies. Bernard Ebbers took the reigns as CEO in 1985 and turned the company into a highly profitable one, at least on the outside. In 2002, Ebbers resigned, WorldCom admitted fraud and the company declared bankruptcy (Noe, Hollenbeck, Gerhart, &Wright 2007). The company was at the heart of one of the biggest accounting frauds seen in the United States. The demise of this telecommunications monster can be accredited to many factors including their aggressive-defensive organizational culture based on power and the bullying tactics that they employed. However, this fiasco could have been prevented if WorldCom had designed a system of checks and balances that would have

P., & Coulter, M. K., 2012, p. 152), although it seems none of WorldCom’s executive management team seemed to feel this way. Many steps could have been taken to prevent the collapse of the WorldCom empire, but only a few key managers held the power and none were willing to take action. One control that did not exist in WorldCom’s culture was allowing both internal and external auditors access to all necessary documents and statements. Without full disclosure of these items no one could see how many risks the company was taking by making fraudulent entries against their books. Also the external audit team, Arthur Anderson, held WorldCom as one of its best customers which was a major conflict of interest. This relationship lead to many fundamental mistakes from Anderson not keeping pressure on WorldCom and getting all vital information that would prove how poorly the company was being run. Had they been operating transparently, auditors and employees would have seen the accounting deception and could potentially have stopped it prior to the company’s collapse. In addition, by employing multiple auditing firms many of the mistakes being made may have been caught and discontinued from the beginning.

There were several people responsible for the WorldCom scandal, as well as, whistleblowers that first discovered the accounting fraud. The former CEO, Bernard Ebbers was found to be the main offender of the fraud. He did it by capitalizing inflated revenues with phony accounting entries and he was eventually sentenced to 25-years for fraud, conspiracy and filing false documents with regulators. Scott Sullivan, the former CFO, pleaded guilty to one count of conspiracy to commit securities fraud and was sentenced to 5-years after testifying against Bernard Ebbers. The former Director of General Accounting, David Myers, pleaded guilty to