WorldCom and The Mississippi Scheme Scandals Essay

In 1661 Louis appointed Jean-Baptiste Colbert as controller general of finances. This proved to be very successful in adding to the increase of France’s economy, and it helped Louis achieve his second goal of having “one law.” Colbert’s ideas were similar to that of mercantilism. He insisted on having an economic system that would make France a self-sufficient powerful country where they exported more than they imported. He improved France’s economy through the invention of a merchant marine fleet, the support of industries, the control of tariffs on French goods, and the collection of taxes. All of these gained money for France, which led to the creation of a powerful army. Due to a powerful army, France was able to secure its natural frontiers, even in the North East, which was France’s weakest natural border. While Louis claimed a flaw of his was that, “I loved war too much,” he was able to make a strong French presence in Europe, adding to his idea of “one law.”

“Although it was not the internal audit department’s duty, Cooper decided that she and several others in her division would investigate the company’s financials on their own, performing what essentially would be a series of mini audits. She did not mention that task to any of the higher-ups at WorldCom; instead, she and her staff worked long hours, often through the night, as they pored over the books.” (Mead) On one side of things, people could see that Cynthia Cooper acted on two code of ethics principles that internal auditors are expected to apply and to uphold. One being her integrity, which states that “internal auditors establishes

Prior to the Tyco scandal, the company was one of America's largest conglomerates, with operating revenues of 38 billion dollars and 240,000 employees, worldwide. Tyco Laboratories began operations in 1960, performing experimental work for the U.S. government. The firm went public in 1964 and quickly expanded, mostly by acquisition, to exploit the commercial applications of its work. Dennis Kozlowski joined the company in 1975 as an assistant controller. The company subsequently shifted its focus from growth to profits within its three primary divisions: fire protection, electronics, and packaging. Kozlowski joined Tyco's board in 1987 and became president and chief operating officer two years later. Kozlowski

Since their prices were way too low, eventually profit margins began to decline very fast, this resulted in millions of losses. Instead of disclosing and recording these losses, President Monus along with the CFO Pat Finn and two other high ranking officials, decided to cross out the correct numbers insert highly inflated numbers, during this a sub ledger with the real numbers was also being kept. After a few months of this practice Pat Finn the CFO took on the responsibility of altering the numbers. By mid 1990 Monus's refusal to raise prices led to even more cover ups and eventually more members of the organization began to get involved in the fake reporting including the manager of accounting and the Controller. By the time the fraud was discovered executives at Phar-Mor had misstated financial statements by over $500 million.

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 market lost billions of dollars and stock prices plummeted in result of the scandals of

At the turn of the turn of the twenty-first century, a tide of corruption scandals involving reporting and accounting fraud with major US publicly-traded corporations generated a crisis of confidence in US financial markets. Major, apparently prosperous, companies like WorldCom, Sunbeam, Adelphia, and the infamous Enron engaged in accounting fraud of massive proportions to cover financial losses. These actions caused enormous outrage with the US electorate and infused the mistrust of market investors, situation that threatened to disrupt the process by which companies raise capital. Green (2004) concludes that it was adamant to restore public confidence in the capital markets by the end of 2002.

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.

Due to these criminal activities, many top executives were convicted fraud and sentenced to spend time in prison. WorldCom activities did not align with the company's overall mission and goals. The actions taken by management were not in the best interest of the customer instead they were consumed with acquisitions and increasing the value of WorldCom Shares. The management also should have considered general accounting practices during their strategic planning. Furthermore, create procedures that protect all stakeholders within the firm.

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

Tom Padgett made the affirmations and management of the company gave the papers, yet every source was included in the fraud.

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.

The Enron Scandal was an enormous controversy in 2001. This scandal went on for years until finally the government caught up with what was going on. In the Enron case, the company was stating that they were making profits from assets even though they were not making any money from it. They would also transfer any information to an off-the-books corporation if they were not making as much as they thought that they should be making. All this information would be unreported so that nobody would know that the company was losing money.

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.