WORLDCOM CASE ANALYSIS
The WorldCom case is another example of large corporation failures where individuals in the firm failed to act in a morally correct way. Bernard Ebbers, the CEO and Scott Sullivan, the CFO, of the corporation should have been aware of the accounting processes being used in his firm (and undoubtedly he was aware) and should have taken steps to prevent others test for ethics. Authur Anderson also missed opportunities where he could have disclosed the fraud. Cynthia Cooper and her team where the first people who uncovered the major fraud that was taking place at WorldCom. Accountants at WorldCom capitalized expenses in blatant violation of generally accepted accounting principles under the pressure from above management to maintain income growth. This started when WorldCom and other telecommunication firms faced reduced demand as the boom ended and the economy entered a recession. The revenues fell but the debt remained. The profit market value of the company also decreased. Fraud arose through the accounting department and secondly the company inflated revenues with fraudulent accounting entries from corporate unallocated revenue accountants.
WorldCom reduced the amount of money held in reserves by $2.8 billion. They then moved the money into revenue line of its financial statements and then classified operating as their long term capital investments and consequently turned their losses into profits. They also made the assets appear more valuable. Revenue growth slowed and stock price began falling. WorldCom’s expenses as a percentage of its total revenue increased because the growth rate of its earnings dropped. This is when they reduced the amount of money held in reserve (to cover liabilities for the company it acquired) by the $2.8 billion and moved it into their reserve line of its financial statements as an attempt to increase their revenues. Hiding these expenses in this way gave them another $3.85 billion.
An investigation then took place by the Securities and Exchange Commission (SEC) and the corporate’s internal auditor, Cynthia Cooper, uncovered $ 3.8 billion of the fraud. After the discovery of such fraud the shares that cost $64.50 per share fell to $1 a share and further fell below the $1 upon the information that there might be further irregularities in the accounting systems. The SEC was suspicious because while WorldCom was making profits, AT&T (another telecommunication giant) was making losses. An internal audit turned up billions WorldCom had announced as capital expenditures as well as the $500 million in undocumented expense and another $2 billion was found in questionable entries and the audit committee could not produce documents supporting capital expenditures. WorldCom then admitted they inflated their profits by $3.8 billion and then filed for bankruptcy. A lot of employees lost their jobs, shareholder lost their shareholder value. Lack of courage of employees to communicate the fraudulent activities believed it would have cost them their jobs. Therefore he environment was unethical work culture where employees where pressurized to manipulate accounts. Employers that went on with this were rewarded and those who did not were threatened. When WorldCom was put into bankruptcy the U.S noticed one of the largest accounting frauds in history. The corporation was disqualified from further federal government contract. The CEO, Bernard Ebbers was even sentenced to life imprisonment.

BIBLOGRAPHY
Kidder,R. and M. bray. (2001). Moral courage;