...Ebbers Behind Bars In 2005, Bernard Ebbers, former CEO of WorldCom, was sentenced to twenty five years in jail in a very controversial ruling. There are many reasons in the World Com case that made sending Bernard Ebbers to jail the right thing to do. As a CEO of WorldCom, Mr. Ebbers had many obligations in order to run the company successfully; some of those obligations he fell far short on. The major one was not realizing when he was in too deep; instead of managing each of the new assets, he obtained he got greedy and kept buying and buying and overlooked many of the details. “WorldCom is just another case of failed corporate governance, accounting abuses, and outright greed… With 65 acquisitions in six years and several of them large ones, WorldCom management had a great deal on their plate” (Moberg & Romar 1). MCI is just one of many of the companies that WorldCom bought and mismanaged. WorldCom got in over their heads when they kept buying up company after company. I think that WorldCom could have saved itself if it took some time after each merger to manage and integrate their new assets instead of continually looking to buy more. “For all its talent in buying competitors, the company was not up to the task of merging them. Dozens of conflicting computer systems remained, local systems were repetitive and failed to work together properly, and billing systems were not coordinated” (Moberg & Romar 1). The big question that needs to be answered is if Bernard Ebbers...
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...Abstract Ebbers began his business career running a chain of motels in Mississippi then transformed a small discount phone business he started into the telecommunications giant WorldCom. After he resigned he was convicted of one of the largest accounting scandals in the United States that had happened while he was the CEO. As a defense Ebbers tried to say that he was unknowing and don't know about technology or finance and accounting. The jury did not buy into his theory and convicted him. . Should have Bernard Ebbers gone to jail? Background Bernard Ebbers was born August 27, 1941 in Edmonton, Alberta. He earned his degree is Physical Education at Mississippi College in 1967. He worked as milkman and bouncer when he was not in school. Ebbers first began a business career by operating a chain of motels in Mississippi. He began working in the telecommunications business in 1983 when he joined several other investors in the newly formed Long Distance Discount Services, Inc (LDDS) were he was named Chief Executive Officer (CEO) within 2 years. In 1995 the company was renamed WorldCom after it had acquired over 60 other telecommunications companies. In April 2002 Ebbers resigned as CEO and In June 2002 WorldCom releases that they had to recalculate earning figures for the last five quarters. In March 2004 he was indicted of fraud and conspiracy and in July 2005, he was convicted on all nine counts against him for the WorldCom accounting scandal that lost investors...
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...Accounting scandals CEO Bernard Ebbers became very wealthy from the rising price of his holdings in WorldCom common stock. However, in the year 2000, the telecommunications industry entered a downturn and WorldCom’s aggressive growth strategy suffered a serious setback when it was forced by the US Justice Department to abandon its proposed merger with Sprint in mid 2000. By that time, WorldCom’s stock was declining and Ebbers came under increasing pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses (timber and yachting, among others). During 2001, Ebbers persuaded WorldCom’s board of directors to provide him corporate loans and guarantees in excess of $400 million to cover his margin calls. The board hoped that the loans would avert the need for Ebbers to sell substantial amounts of his WorldCom stock, as his doing so would put further downward pressure in the stock's price. However, this strategy ultimately failed and Ebbers was ousted as CEO in April 2002 and replaced by John Sidgmore, former CEO of UUNet Technologies, Inc. Beginning modestly in mid-year 1999 and continuing at an accelerated pace through May 2002, the company (under the direction of Ebbers, Scott Sullivan (CFO), David Myers (Controller) and Buford "Buddy" Yates (Director of General Accounting)) used fraudulent accounting methods to mask its declining earnings by painting a false picture of financial growth and profitability to prop up the price...
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...Daniels Fund Ethics Initiative University of New Mexico http://danielsethics.mgt.unm.edu WorldCom’s Bankruptcy Crisis INTRODUCTION The story of WorldCom began in 1983 when businessmen Murray Waldron and William Rector sketched out a plan to create a long-distance telephone service provider on a napkin in a coffee shop in Hattiesburg, Miss. Their new company, Long Distance Discount Service (LDDS), began operating as a long distance reseller in 1984. Early investor Bernard Ebbers was named CEO the following year. Through acquisitions and mergers, LDDS grew quickly over the next 15 years. The company changed its name to WorldCom, achieved a worldwide presence, acquired telecommunications giant MCI, and eventually expanded beyond long distance service to offer the whole range of telecommunications services. WorldCom became the second-largest long-distance telephone company in America, and the firm seemed poised to become one of the largest telecommunications corporations in the world. Instead, it became the largest bankruptcy filing in U.S. history at the time and another name on a long list of those disgraced by the accounting scandals of the early 21st century. ACCOUNTING FRAUD AND ITS CONSEQUENCES Unfortunately for thousands of employees and shareholders, WorldCom used questionable accounting practices and improperly recorded $3.8 billion in capital expenditures, which boosted cash flows and profit over all four quarters in 2001 as well as the first quarter of 2002. This disguised...
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...Introduction WorldCom is a telecommunications company which was lead by CEO, Bernard Ebbers and CFO, Scott Sullivan. In 1999, WorldCom was not melting Wall Street’s revenue and earnings expectations, and it appeared that the coming year would produce more bad news. The CFO argued for setting realistic targets. However the CEO insisted that the company needed double digit growth, and pushed for aggressive targets. These aggressive targets were not supported by historical data or strategic assessments. In order to meet these targets, WorldCom began boosting its revenue through a wide range of accounting measures, including drawing down on reserves set aside for expenses. The economic situation at the time was not taken into account when implementing these aggressive accounting measures. Other similar companies were reporting declining revenues. It was identified that the management who were making the aggressive accounting decisions, were also posting the journals to the general ledger, and reviewing and approving the reporting. Pressure was placed on personnel who did not support the aggressive targets. A great deal of focus was put on “teamwork” and being a strong “team player”, which is said to have been a strategy to reduce dissenting opinion, eventually leading the organization to follow a “groupthink” attitude. In 2000, the telecommunications industry entered a downturn and WorldCom’s aggressive growth strategy suffered a serious setback. However, due to the accounting...
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...Bernie Ebbers - WorldCom | Ethical Profile | Khristin B. Vargas | uNIVERSITY OF lA vERNE 1/22/2015 | | | Table of Contents Introduction 3 Timeline leading to Ebbers conviction: 3 Current Events 4 Perceived Motivations 5 Impacts 6 Conclusion 6 Bibliography 7 Introduction “The recent corporate accounting scandals at Enron, WorldCom, and other corporations have helped to fuel a massive loss of confidence in the integrity of American business, Bernie Ebbers was one of the many owners that crashed our integrity” (Carson, 2003, p. 390). Bernie Ebbers, CEO of WorldCom, business executive, and convict, is known to be one of United States most unethical leaders in history. He was convicted on March 15, 2005 on nine counts of conspiracy, securities fraud and making false regulatory filings. WorldCom was 2nd in the nation’s largest long distance telecommunications company, however the company was red flagged when a series of rapid acquisitions took place. The company was founded in 1995 and by 2000 it had seen rapid growth improvements as did Ebbers career. Ebbers went from the big “C” in CEO to the little “C” in convict within a short time frame. Timeline leading to Ebbers conviction: * 1980s - Ebbers got involved in the investment, acquisition, and management of telecommunications companies (Ebbers, 2015) * 1995 - Bernie co-founded WorldCom and was given the title of chief executive (Ebbers, 2015) * Late 1990s – Ebbers acquired...
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...WorldCom is one of the biggest scandals that happen in the world, especially in the United States of America. WorldCom merged with MCI in 1997 for US$37 billion to form MCI WorldCom. Later on WorldCom wanted to merge with Sprint Corporation in 1999 becoming a $129 billion merge, but before the two companies finalized the US department of Justice and the European Union stepped in and didn’t want this to happen, for this merge had the possibility of creating a monopoly. Bernard Ebbers was the CEO of WorldCom at the time, he became very wealth with WorldCom common stock. Without the merge of Sprint, WorldCom Stock started to decrease over time, and the banks were pressuring Ebbers and he had to cover margin calls on his WorldCom stock that was used to finance other business like (timber, yachting.) From 1999 through 2002 Scott Sullivan (CFO), David Myers (Controller) and Buford Yates (Director of General Accounting) were using shady accounting methods to show the company profitability and financial growth when company was losing shares. The company was capitalizing there expenses when they should have been expensing them, making the balance sheet look better than what it really is. The second issue for the company was making fake accounting entries to make them look like they generated revenues from corporate unallocated revenue accounts. WorldCom had approximately $3.8 billion in fraud of June 2002. For unethical practices WorldCom was capitalizing their products when they...
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...values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization" (Hill & Jones, 2001). Our book defines code of ethics as, “a formal statement of an organization’s primary values and the ethical rules it expects its employees to follow” (Robbins & Coulter, 2012, p. 165). In the case of Worldcom, it is clear that the organizational culture was heavily impaired and nearly non-existent. The company did not have a formal statement of values or ethical rules it expected its employees to abide by. This is the underlying issue that eventually led to the demise and bankruptcy of Worldcom. As a leader, you are expected to lead by example and set your organization up for long term success. When CEO of Worldcom, Bernard Ebbers, was told about an internal effort, from with Worldcom, to create a corporate code of conduct, he stated that the project was a, “colossal waste of time” (Kaplan & Kiron, 2007, p. 3). It’s clear that the organizational culture within Worldcom was condemned from...
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...WorldCom Characters: 1. Val- Scott Sullivan (CFO) 2. Mila- Cynthia Cooper (Internal auditor) 3. Leslie- Employee 1 4. Kylie- Employee 2 (a junior auditor working with Cynthia Cooper) 5. Donna- Arthur Andersen 6. Brynner- David Myers (Controller) 7. Patrick- Bernard Ebbers (ex-CEO) 8. Ivy- The Government (SEC) 9. Ruby- Employee 3 Scene 1: INTERROGATION Setting: Interrogation room Individual frames on each interviewee (Scott, Cynthia, The Employees, Andersen, David Myers, Bernard Ebbers) Frame 1 (Interrogation of David Myers) Ivy: What was your involvement in the WorldCom accounting fraud? David Myers only smirks confidently. Ivy: Mr. David Myers, let’s not play games here. You were controller for WorldCom. We know what you did. So, why don’t you just get this over and done with? How did you commit the fraud? He only smirks even more. Quite devilishly. Bryner: Did we, now? He looks straight into the “camera”. Bryner: Did we actually commit fraud? He smirks again and sits back confidently into his chair. Frame 2 (Interrogation of Employee, Miss Tubaga) Ivy: Miss Tubaga, you worked as accounts officer for WorldCom’s network services. I’m sure you yourself wondered about their accounting practices. You are, in fact, a certified public accountant. Miss Tubaga is only looking at her knuckles, a habit she has attained when she’s nervous. Ivy: Miss Tubaga—Leslie—you can talk to me. We’ll make this easy for you, make you a valuable...
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...WorldCom history The history of WorldCom Company dates back in 1983 which started as a partnership between a former basketball coach Bernard Ebbers. This company was established at Mississippi as a coffee shop, which later developed to long distance Telephone Company. The company’s name initially was Long Distance Discount Service whose operations began on 1984. After several years in operation, the company became public in August 1989 with Bernard Ebbers as the company’s CEO (Moberg 4). Over the years, the company developed through mergers and acquisitions and becomes public in the year 1989. The notable merge which enabled the company to go public was the merger with the advantage companies Inc. This led to changing of the name from just LDDS to LDDS WorldCom in 1995 and to just WorldCom a year later (Moberg 4). In 1993, the company acquires long distance providers in the name of Resurgence Communications Group and Metromedia communications. This made history as the fourth largest long distance communication firm in United States. There were also several other mergers and acquisitions such as with IDB in 1994, WilTel in 1995, MFS communications in 1996, and the greatest merger which involved MCI communications. In 1998, WorldCom completed the merger with MCI at a cost estimated to be $40 billion. This was viewed as the greatest merger after brooks fiber properties and CompuServe which were valued at $ 1.2 and $ 1.3 billion respectively (Moberg 6). Another notable aspect...
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...WorldCom Ethical Scandal In the late 1990’s, WorldCom was a successful company and leader in the telecommunications world. They had merged with MCI and the company was regarded for being innovative and growth hungry. However, in the midst of all the mergers WorldCom CEO Bernard Ebberly began to mismanage the company. WorldCom was no longer meeting their numbers and it looked like stock prices would fall. Rather than letting this happen, executives at WorldCom doctored the books. CFO Scott Sullivan and auditors used accounting practices and judgments that were highly illegal and unethical (Mintzberg 2003). Over the course of its operations, WorldCom had successfully acquired a total of 65 companies, of which 11 were acquired between 1991 and 1997, and in that course accumulated around $41 billion in debt (Romar 2006). By the time it declared bankruptcy in 2002, the organization’s growth strategy through acquisitions, its loans to senior executives, and poor corporate governance contributed to the fall of the company. Through a series of fraudulent activities and unethical behavior, the company fell from a leader in the telecommunications industry to a company filing for bankruptcy. WorldCom’s financial executives used fraudulent accounting methods to present a false representation of the company’s financial stability. They hid various costs by capitalizing them by listing these costs as assets on their balance sheet instead of properly recording them on the income...
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...WorldCom the Rise and Fall WorldCom began in 1983 during the breakup of AT&T, which enabled competitors to start selling long distance telephone service to individuals and business customers. A group of investors from Hattiesburg, Mississippi decided to start a communications company called Long Distance Discount Services (LDDS). The company lead by Bill Fields leased a local Bell System Wide-Area Telecommunications Service (WATS) line and resold time on the line to businesses. The sophisticated long distance technology was designed to handle a high volume of calls. The lines were leased at a fixed rate so the idea was that the more customers a company could obtain the lower cost for the company. Fields was able to sign 200 customers, however during this time the telecommunications industry was very competitive and when Bell starting raising the fixed lease rate on the lines LDDS was in trouble. By the end of the first quarter 1985 the company was losing approximately $25,000 a month. When Fields attempt to sell off the company was unsuccessful, one of the initial investors by the name of Bernard Ebbers agreed to become president and chief executive officer for LDDS, who at this time was 1.5 million dollars in debt. Ebbers, a Canadian, was a successful business owner in the hotel business. He came to the United States on a basketball scholarship to Mississippi College. Upon graduation Ebbers saw an opportunity in the motel industry and was able to borrow enough...
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...CONTROVERSY OF SARBANES OXLEY WorldCom provided telecommunication services of voice and internet. They began as a long distance reseller in 1984. The company was headed by Bernard Ebbers who became the CEO in 1985. The company didn’t go public until the middle of 1989. Through the years, WorldCom became more than just a telecommunications company. They were also information technology out-breakers. They were able to become an internet powerhouse and challenge their market “via mostly fiber-optic, business-oriented local networks” (Thyfault). WorldCom eventually became the largest telecommunications company in the late nineties due to the merger of many other companies. Their biggest merger was WorldCom and MCI in 1997. With this merger they became the second-largest long-distance communication behind AT&T. WorldCom didn’t stop there with IT breakthroughs; in lieu of the MCI merger they launched one of the first Virtual `Private Networks that are provided to companies. VPN’s are still used today in the IT industry. They even helped companies outsource the design and management of their web hosting operations (MCI). WorldCom was one of the most powerful companies and so big that when Sprint Telecommunications Company agreed to merge with MCI WorldCom, it would have been the largest merger in history. This would have created a giant monopoly in the economy. That’s why the government stepped in and brought about a violation of anti-trust statutes (Worldcom). This lead to government...
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...Who is WorldCom? The company began as Long Distance Discount Services, Inc. (LDDS) in 1983, based in Hattiesburg, Mississippi. In 1985, LDDS selected Bernard Ebbers to be its CEO. The company went public in 1989 through a merger with Advantage Companies Inc. The company name was changed to LDDS WorldCom in 1995, and later just WorldCom. The company’s growth under WorldCom was fueled primarily through acquisitions during the 1990s and reached its apex with the acquisition of MCI in 1998. Among the companies that were bought or merged with WorldCom were Advanced Communications Corp. (1992), Metromedia Communication Corp.(1993), Resurgens Communications Group(1993), IDB Communications Group, Inc (1994), Williams Technology Group, Inc. (1995), and MFS Communications Company (1996). The acquisition of MFS included UUNET Technologies, Inc., which had been acquired by MFS shortly before the merger with WorldCom. In February 1998, a complex transaction saw WorldCom purchase online pioneer CompuServe from its parent company H&R Block. WorldCom then retained the CompuServe Network Services Division, sold its online service to America Online, and received AOL's network division, ANS. The acquisition of Digex (DIGX) in June 2001 was also complex; Worldcom acquired Digex's corporate parent, Intermedia Communications, and then sold all of Intermedia's non-Digex assets to Allegiance Telecom. November 10, 1997, WorldCom and MCI Communications announced their US$37 billion merger to form...
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...a Business Failure: WorldCom LDR531 12/13/2010 Lynette Grizelle Over the past 15 years there has been numerous business failures in the United States and most of these failures have been because of inadequate organizational behavior techniques. According to The Great American History Fact-Finder, the WorldCom bankruptcy was the “largest corporate fraud and business failure in the United States” (WorldCom Bankruptcy, 2004). Prior to their fall in 2002 WorldCom was the nation's second-largest long distance and data services provider. They were also known as one of the largest Internet providers in the world and a provider of critical applications for the United States government (Zekany, Braun, & Warder, 2004). Even though WorldCom appeared to being doing well financially according to their financial statements, the truth was the chief executive officer (CEO) Bernard Ebbers, chief financial officer (CFO) Scott Sullivan, and controller David Meyers were enforcing unlawful accounting practices. According to Zekany, Braun, and Warder (2004) “Ebbers made as many acquisitions as he could, relying heavily on using WorldCom stock as currency,” even though the stock was not worth nearly as much as assumed by the public. Cynthia Cooper, internal auditor for WorldCom and her associates began noticing accounting discrepancies years before the organization went under. In an interview with Katz and Homer (2008) Cynthia stated that, “my feelings changed from curiosity to discomfort...
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