Worldcom Fraud Paper

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

While Enron was the complicated fraud, WorldCom fraud was the simplest to commit. WorldCom, now known as MCI and acquired by Verizon Communication since 2006, was founded in 1983 to create a discount long-distance provider. The company grew very rapidly in the 1990s due to several large acquisitions. (Beresford, Katzenbach, & C.B. Rogers, 2003) WorldCom completed 3 mergers in 1998 and one of the merger is largest at that time which is purchasing MCI Communications Inc. for $40 billion. WorldCom also merged with Brooks Fiber Properties Inc. for $1.2 billion and CompuServe Corp. for $1.3 billion. WorldCom and Sprint Corp. agreed to merge in 1999 and its shares’ price went up to more than $64 but, in 2002 the merge was blocked by regulators in both the U.S. and Europe on concerns that it would create a monopoly (The rise and fall of WorldCom, 2008). The failed merger signified the beginning of the end for WorldCom (J. Randel Kuhn & Sutton, 2006).

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

Over the last decade, headlines have told stories of unethical behavior from corporations such as Enron, Worldcom, Boeing, Xerox, and Rite Aid. As business continued to grow, so has the laws and regulations that govern corporations to make sure they continue to practices their business legally and ethically. Rules and regulations are made because of the unethical practices that corporations have made due to greed and power.

It is clearly seen that there is the violation of the laws as Ebbers used allegedly funds for other business ventures and drop down the stock price which brought questions to WorldCom as “Earning”. The staff within the company did not want whistleblower for a fugitive false account. There are laws that required to follow at the corporate level.

Occupational fraud is defined by the ACFE as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” (Report to the Nations, 2014) These kinds of frauds are both committed against organizations and on behalf of the organization. They occur when an employee uses his/her occupation to steal from the organization. Occupational fraud is done secretively. Fraud committers perceive an opportunity to conceal their fraud so that no one finds out about it. Occupational fraud also violates the employee’s fiduciary duties to the organization. An employee is expected to act in the best interest of the organization and its stakeholders. If said employee understates revenues then he/she is violating that fiduciary duty. “[This type of fraud] is committed for the purpose of direct or indirect financial benefit to the employee and costs the employing organization assets, revenues, or reserves.” (Albrecht, 10)

Knowingly committing and concealing fraudulent activities is undoubtedly illegal. If I were a manager during this scandal, my initial focus with my employees would have been centered around ensuring all employees understood and adhered to all laws associated with the reporting and manufacturing of our products. By creating a common understanding (Proverbs 4:7), it increases the likelihood that employees will have the same ethical baseline. If we don?t have this focus, James Lewis vs. Caterpillar bulldozer vs Whayne Supply Company confirm that the legislative exposure and jurisdiction is inherently broader (Kubasek, 2016).

This was a white collar crime that destroyed the lives of many individuals inside and outside of the corporation. This was small “mistake” that led to criminal activity. Personal morality and ethics make up the collective morality and ethics of a corporation. In reality, those persons who played apart could have refused to participate in the fraud and could have stopped.

In 1998, Betty Vinson was promoted to a senior manager in the firm’s corporate accounting division. Two years later in her position she experienced a major ethical dilemma. The company WorldCom was a very successful company up until the middle of 2000 when the telecommunication industry entered a protracted slump. The company’s earnings were not Wall Street expectations, and it was saddled with unpaid bills. Vinson’s job was to repair the problem by doing some wrong accounting practices. The ethical dilemma is weather she should or shouldn’t do and the consequences if she does or doesn’t do. What ethical decision should Betty Vinson take?

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.

Preventative measures could have been instituted to avoid the WorldCom corporate fraud. First, WorldCom should have had an external Board of Governors comprised of businessmen

The fraud was committed by generating assets out of operating expenses and inflating revenues to continue reporting double-digit revenue growth and false statement of stock prices. WorldCom 's fraudulent, false and improper action of its line cost expenses, was not disclosed to its investors. WorldCom did not disclose to its investors, or elsewhere, that it had executed such changes in its procedures of accounting for line cost expenses. As a result of these fraudulent, false and improper accounting manipulations, “WorldCom materially overstated its earnings as well as its assets and materially

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.

WorldCom, established in 1983, whose CEO was Bernard Ebbers, was the second largest long distance phone company in the US after AT&T. It could be seen as a pride of America until it got into one of the biggest accounting scandals in the American history which finally led to its bankruptcy in 2002. On July 21st, 2012, WorldCom filed for bankruptcy, which was worth 103.9 billion USD and became the largest filing at its time. Its CEO, Bernard

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