Forensic and Business Investigation

The Fraud Triangle

Perceived Pressure

Pressure is a person’s motivation to commit fraud. Financial, emotional, and lifestyle pressures are the most common types existing for perpetrators.

The first pressure which arises is social pressure. In order to stay ahead of the market and beat analyst’s expectations, Ebber was focused on increasing revenue growth by acquiring new companies. WorldCom expanded rapidly and was more focused on expanding rather than making their existing acquisitions work. Ebber used WorldCom’s stock to pay for the acquisitions. To accomplish this, WorldCom’s stock market price had to continually increase. To keep up with the rapid corporate expansion, Ebber was constantly pressured to show that WorldCom has a strong financial position in the market.

Secondly, was performance pressure. It came from the fact that WorldCom marketed itself as a high-growth company, with revenue growth playing a significant role in WorldCom's early success. Analysts were marveled at WorldCom's ability to outgrow an industry even during downturn period. Ebbers repeatedly proclaimed WorldCom's impressive record on revenue growth during his conference calls with analysts. Ebber had a reputation to uphold and believes that continuing revenue growth would keep WorldCom’s stock market value increasing, so that WorldCom can carry on with corporate expansions with the use of stock as payment for the acquisitions.

Thirdly, was financial pressure. Both Bernie Ebbers and Scott Sullivan led lavish lifestyles which required huge amounts of money to upkeep. They were determined and pressured to have high salaries to pay for their expenses. They would run into the possibility of becoming bankrupt if they did not have the money to pay off their debts. This would highly pressure them to do anything to receive high remuneration even if it requires fraud.

Fourth, was the financial incentives from committing fraud. By inflating the financial position of the company,...