Worldcom Scandal

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WorldCom

The WorldCom Scandal
Corporate headquarters:
Ashburn, VA
EXECUTIVES
Name
Occupation
Birth
Death
Known for
Vint Cerf
Scientist
23-Jun-1943 Co-Designed Internet's TCP-IP protocol
Bernard Ebbers
Business
27-Aug-1941 CEO of WorldCom, 1985-2002
PAST BOARD MEMBERS OR DIRECTORS
Name
Occupation
Birth
Death
Known for
Dennis R. Beresford
Business
23-Nov-1938 FASB Chairman, 1987-97
James Q. Crowe
Business
c. 1950 CEO of Level 3 Communications
EXTRANEOUS
Name
Occupation
Birth
Death
Known for
Richard C. Breeden
Government
6-Dec-1949 SEC Chairman, 1989-93

In 1983 two business men by the names of Murray Waldron and William Rector developed a plan to start a discount long distance service called LDDS. One of the first investor they acquired in 1985 was Bernard John “Bernie” Ebbers who became chief executive officer of LDDS. The company became public in 1989 through the acquisition of Advantage Companies Inc., In 1993
LDDS merged with other companies to become the United States fourth largest long-distance network. The company then went on to acquire even more telecommunication companies from
1993 to 1995. One of the companies by the name of Williams Telecommunication was a voice and data transmission company that was acquired for $2.5 billion. After the purchase of this company LDDS changed its name to WorldCom Inc. as we now know it today.
In 1998 WorldCom merged with three companies, and one of them was MCI which was
Purchased for $40 billion one of the largest in history in the 1900’s. The company tried to merge with the Sprint Corp. but was blocked by the US and European regulators in 2000. In March of
2002 the U.S. Securities and Exchange Commission requested information from WorldCom.
After the request WorldCom announced they would cut about 3,700 jobs or 6 percent of it’s staff and 4 percent of its overall work force. This started a trickle effect of other companies cutting their long-term and short-term corporate credit ratings to them. The Chief Executive Officer
Bernard Ebbers resigns and the Vice Chairman John Sidgmore took over the position. The companies debt rating is considered to be of junk status at that time. The company would then go onto announce that they had overstated earnings in 2001 and the first quarter of 2002 by more than $3.8 billion. The accounting maneuver that cause this was by the company classifying payments for using other companies’ communications networks as capital expenditures when they really where expenses. The companies was able to manipulate the books for years before anything was detected. Because of this scandal consumers lost their money and the pension fund companies lost money by investing in WorldCom. The shareholders were unable to recover from the fall of the company, the NASDAQ D-listed WorldCom and the index year went from
5000 2000 to index year 1500 2002. Because of all of this the company did not exhibit social responsibility while in operation because greed
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