WorldCom Fraud Case Essay

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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). “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 executives 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 a
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