Worldcom Case Study

There has been several high-profile scandal in the past couple of years. One of this high-profile scandal is the WorldCom Scandal. The WorldCom scandal took place in year of 2002. MCI, Inc. also known as WorldCom was an American telecommunication corporation, currently a subsidiary of Verizon Communications, with its main office in Ashburn, Virginia. MCI filed the nation's largest bankruptcy in July 2002 amid an accounting scandal that has grown to $11 billion. WorldCom had hid a total of about 3.8 billion dollars in expenses. The some of the major key players of the WorldCom scandal included Bernard Ebbers, Scott Sullivan, David Myers,

The Board of Directors consisted primarily of Gerry Wiegert, John Pope, and Barry Rosengrant. Gerry was the President, so it was typical for him to be a part of the board. John Pope was a financial consultant; therefore, he was adequate to be the financially literate person on the board. Barry was in real estate, but he was a consultant of Vector Car which gave him some knowledge of the company. Dan Harnett and George Fencl were also a part of the board for some point of time; they also had adequate knowledge to be capable additions to the board with their knowledge of law and

“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

Bob did a really good job in selecting the outside talent to represent on the advisory board. Bob knew that the family owned businesses had their own challenges so he chose Barry Ready, President of Readymade Office Systems, to join the Board because of the similarities between the two businesses. Bob also brought in functional experts Dick Crandall (finance) and Jim Carter (sales and marketing). Later, Bob added Peggy Thomas to bring diversity to the board and Mark Anderson, COO of Portland Timber, because of his real estate expertise.

Lockheed Martin’s board of directors consist of twelve active members. There are four women and eight men, all of which are external members other than the CEO. One woman, Marillyn A. Hewson, is the Chairman, CEO, and President of Lockheed. She, among other board members has 30+ years of management experience and is responsible for acting with independent interest for the company in order to avoid compromising judgement. Considering majority of the board has external membership, it benefits the company 's overall corporate governance because it avoids conflict with other positions inside of the board. Similarly, many large companies have twelve or more members on the board in order to oversee the corporate governance, strategic development, and capital investments of stock and financial operations.1 As an illustration, the board of directors has recently been ranked a 6 (on a scale of 1-10) as of November 1, 2016 according to the ISS (International Space Systems). This is a low score on the ISS scale because the board lacks several qualities that the ISS checks for annually. The ISS QuickScore determines how well the company incorporates board structure, compensation, shareholder rights, and risk oversight. According to the ISS, a score of a 1 is a perfect score and a score of 10 describes of lack of compatibility within the board. As a company overall, Lockheed Martin has a QuickScore of 1 (QS:1). The score is meant to “provide an indication of relative quality and is

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.

WorldCom, US second biggest telecommunication organization stunned the world by documenting chapter 11 at 21 July 2002. The WorldCom documenting surpassed Enron and turned into the biggest chapter 11 recording in United States history. Because of its fast development, WorldCom is likewise vigorously in the red as they back the organization development with obligation. The breakdown of WorldCom did influence their workers, retailers, the legislature as well as financiers.

To make matters worse, Nortel’s Board of administrators failed to have one member that had monetary experience. The twelve-member board was freelance of Nortel, however, most of the members had alternative directorships. This created it troublesome for them to

I learned some new things from the case article that were not mentioned in Cynthia Cooper’s book titled Extraordinary Circumstances. However, the gist of it was the same. I will focus my paragraphs based on the three questions.

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

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

“Internal controls are policies and procedures put in place to ensure the continued reliability of accounting systems” (Ingram 2017). WorldCom’s attempts at maintaining internal controls are less than favorable. Segregation of duties enables the division responsibilities to ensure that no employee completes two similar tasks. The CEO’s monitoring of WorldCom’s financial processes shows that the company has a lax segregation of duties, which makes it easier to commit fraud. Access controls protect financial data from unauthorized access, however, WorldCom’s extent is password-protected computers. No access inventories are taken to monitor employee usage, so there is no trail of when employees are doing during work.

The board consisted of the leaders of their own fields. It included physicians, lawyers, politicians and some of the former CEOs of airline industry. The board was relatively new and the most severe member had been there for four years. The risk management was the major issue which attracted most attention of the board and they dedicated more time on attention n risk management since the financial collapse.

The company faced issues related to the methods it used in investigating the unauthorized disclosure of nonpublic information to the press by the members of its board of directors. Apparently, Hewlett Packard hired some investigators in the case. The investigator used various techniques such as pre-texting- calling the telephone company and pose as someone else with an aim of obtaining that person’s information or records. The company and the board chairman, Patricia Dunn, were defending the company’s investigations about the director and the journalist. They cited that there were aggressive efforts to note the core source of leaks that were fully justified by the investigators