WorldCom Background
Huge telecommunications company Largest in the U.S. Held responsible for waking up its somewhat sluggish industry in the early 90s
Industry
WorldComs Ascension
AT&T monopoly break-up CEO Bernie Ebbers repackages leftovers and sells them at a bargain price. Broadened services available.
WorldComs Ascension
75 mergers and acquisitions of smaller companies. Bought competitor MCI. Attempted to buy Sprint in 2000. Anti-trust regulations wouldnt allow Sprint acquisition.
WorldComs Fall
The company began to fall in 1999 with massive lay offs and the steady decline of its stock price. Stock prices for WorldCom were around 60 dollars and dropped to pennies in 2002. Business sector mergers were unsuccessful.
Stock Price
Bernie Ebbers
Founder of WorldCom Aggressive businessman who seemed to be the fire for WorldCom's success. Fed new ideas into the company for expansion
Bernie Ebbers
Resigned after allegedly using funds from his company to cover his losses from his stock holdings This brought into question the supposed earnings for WorldCom's 2002-2004 fiscal years.
Various Scandals
Many companies under the eye of the government after financial scandals such as Enron surfaced. WorldCom watched closely because of its shaky future outlook Accountants everywhere under speculation at major corporations.
Financial Accountants
Accounting firms and auditors for companies are in charge of a companys financial reports. They must know the federal regulations for reporting earnings and such so that no figures are misrepresented.
Accounting
The Scandal
In July 2004, Congress is notified by Scott D. Sullivan of financial mistakes August 9th WorldComs auditors uncover $3.8 billion dollars in improper accounting SEC claims that the total for fraudulent accounting comes to $9 billion dollars and dates back to 1999.
The Scandal
Banking firm awards WorldCom execs with IPO stock based on the false earnings they reported. WorldCom executives reaped massive gains from these IPO stocks. Both Bernie Ebbers and Scott Sullivan received shares.
Upper Management
Chief Financial Officer Scott Sullivan and Controller David Myers arrested. Myers pleads guilty to three counts of conspiracy Chief Executive John W. Sidgmore steps aside from his post Buford Yates Jr. pleads guilty to two counts of securities fraud and conspiracy
Upper Management
Betty L. Vinson and M. Normand, former finance officials, are charged with conspiracy. Six other WorldCom directors resign on December 18th
Government Involvement
Despite conspiracy charges and uncovered financial fraud the government still keeps WorldComs eligibility to file for bankruptcy. The U.S. gives $2 billion dollars in assets to tap
Government Involvement
$20 million dollars over the span of three years given to new CEO WorldCom still allowed to oversee government projects
Impact
Overall investor distrust with companies undergoing similar problems. National feeling that the stock market is not as safe as previously thought. SEC forced to keep a closer look on auditor and accountant dealings
Employment
WorldCom forced to lay off 17,000 workers in order to cut costs. Another 3,000 expected to be cut in the next few months One employer is given a settlement after suing the company for pain and suffering and monetary loss.
Conclusion