The Worldcom Group, A Telecommunications Company Case

As with Enron, the more that it was investigated the worse it became. There was fraudulent reporting on the balance sheet and income statement some that was found after the fact during the post-bankruptcy audit ( (Romar & Calkins, 2006). The total of the fraudulently report amounts was approximately $73.7 billion in overstated revenues and $5.8 billion in overstated assets for a total of $79.5 billion in overstatements in less than a two year period (Romar & Calkins, 2006). The biggest difference with WorldCom is that it restructured and was bought by

Because the telecom industry was doing well in the 90's, Ebbers became very rich as the value of WorldCom's stock climbed. However in the early 2000s the industry took a swing for the worst, earnings rejected, and WorldCom's stock began to fall. Ebbers quickly became "upside down" on his stock holdings and owed millions to the banks he borrowed money from. In a desperate attempt to prevent himself from going bankrupt, Ebbers and other company executives began fraudulently altering WorldCom's financial statements. Many people were hurt by the WorldCom fraud. Lots of honest, hard working line level WorldCom employees lost their jobs while losing the value of the stock in their WorldCom retirement savings accounts at the same time. Other investors who depended on WorldCom's false financial statements also lost what they invested. Nobody really benefited from the scandal, however it did give the executives a couple more years of glory and power before everything went

LDDS started with about $650,000 in capital but soon accumulated $1.5 million in debt since it

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

External auditors at the time failed to expose the fraudulent financial practices taking place at WorldCom. Although internal auditors expressed concern about the classification of operating expenses as capital expenditures, their efforts were purposely neglected by top level financial executives allowing the fraud to continue (Lyke,2002) WorldCom's financial standing was manipulated to show that the company was profitable when in reality was on the brink of bankruptcy; on top of that, WorldCom's CEO got a $400 million personal loan with lack of oversight from the board of directors (green 2004, p37 paper). The Sarbanes–Oxley Act brought about a series of financial regulations that could have prevented WorldCom's fraudulent practices. Sarbanes–Oxley requires principal executive and financial officers to certify the accuracy of financial statements and the effectiveness of internal controls for the compilation and disclosure of these statements with enforcement provisions such as fines or imprisonment. The Act prohibits the boards of directors from granting loans to executives. The Sarbanes–Oxley Act also established the Public Company Accounting Oversight Board to oversee the audits of publicly traded companies and regulate accounting practices. If all

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.

Another corporate accounting scandal that occurred in the United States before the Sarbanes-Oxley Act came into effect was the WorldCom scandal in 2002. Seventeen thousand employees were fired and $3.8 billion dollars in profit were removed from their accounting books after an internal audit discovered improper expense accounting in 2001 and 2002. This improper accounting inflated the cash flow so the company would not report a net loss, only a net gain (Hancock, 2002).

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

The above formula isolates free cash flows to the firm from earnings before interest and tax (EBIT). It can be noted that FCFF are after tax (1-T) but prior to interest expense. This initial overstatement of due tax is by design; the tax deductibility of interest payments will be accounted for when incorporating the after-tax cost of debt in the weighted average cost of capital (WACC) to determine the present value of free cash flows.

In 1995 one of the strategic groups Viacom competed in was cable TV content providers with its main competitors including News Corp and Time Warner. The purpose of Viacom is to provide benefit to society through media content. The beliefs Viacom holds to realize its mission are growth, performance, and competition and the values upheld are communication, technology, knowledge, intelligence and the decentralized organization.

From the time of WorldCom’s inception there always seemed to be a tradition in management as if the company was only 100 or so employees. There was a “good old boys” mentality among the limited few running the company and if you were outside that circle then were told only what they wanted you to hear. An unspoken rule among employees was to do what you were told without questions or risk the consequences. One example of this situation occurred when senior management member Gene Morse told an employee “If you show those damn numbers to the f****ing auditors, I’ll throw you out the window” (Kaplan, R.S., & Kiron, D., 2007, p. 3).WorldCom showed no concern regarding an employee’s need and obligation to voice concerns on matters related

Viacom is currently one of the most prominent conglomerates of American media. From films and television shows to music awards and record labels, it is unlikely that one would not run across one of Viacom’s many acquisitions. Beginning in 2005, Viacom has continually expanded throughout the United States and even abroad. Viacom makes use of a variety of different media techniques and strategies to maximize their profits and grow their company. In order to completely understand the business model of Viacom, it is crucial to analyze its role as a conglomerate as well as its use of integration, synergy and the franchise model.

A multitude of choices made by executives at WorldCom led to the ultimate demise of the company as it was previously known, the employees and their livelihoods’, and the trust of the American people. In a time when corporations fail to set ethical standards and provide transparency to investors, how do we change corporate culture on a national level? By analyzing choices made to improve stock prices and company image that ultimately result in failure-- we can guide

WorldCom was once the second largest telecommunication company in the United States. Currently, the company is known for its enormous accounting scandal from 2002, which led to the company filing for bankruptcy protection. WorldCom executives were able to falsify the company’s accounting figures by inflating the company’s assets by almost $13-billion dollars. The fallout after the company filed for bankruptcy led to huge losses for investors, but also for employees and retailers. The scandal is one of the worst corporate accounting crimes in U.S. history, leading to some of its former executives held personally responsible. WorldCom executives instructed accountants to inflate assets by as much as $11 billion dollars, which led to 30,000 in layoffs and a loss of about $180 billion for its investors.