Week 1 Ldr/531

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Category: Business and Industry

Date Submitted: 03/19/2011 01:35 PM

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Examining a Business Failure

WorldCom was a small company back in 1983 named Long Distance Discount Services, Inc. Jackson Mississippi. After 15 years WorldCom become a global telecommunications giant and one of the largest companies in the world (Thornburgh, 2002). Since then the telecommunication industry grown and transformed into highest competitive telecommunication company (Thornburgh, 2002). In early 90 the company aggressively developed and grown from small company to the most highest telecommunication provider. The WorldCom acquired three major companies back in 1997 to 1998. These acquisitions involved the MCI Communication Corporation. The transaction was the largest merger in history, as reported with the amount of $ 40 billion. In the year 2000 the WorldCom was facing problem when the common stock fell from the amount of $ 96.7666 per share down to $ 46 per share and continually decline in shares in 2002. The problem occurred when the WorldCom proposed a recapitalization plan and approved by shareholders. The recapitalization plan would provide tracking stocks for WorldCom and MCI Group and to give the investors the opportunity to invest in distinct lines of the company’s business (Thornburgh, 2002). Bernard Ebbers convinced the WorldCom’s board of directors to lend him corporate loans. The chief executive officer Bernie Ebbers was under pressure from the bank to cover margin calls on his World stock that was used for his businesses. Instead of resolving the problem Bernard Ebbers, Scott Sullivan, David Myers, and Buford Yates decided to commit accounting fraud by falsifying the documents to positive cash flow than a negative cash flaw (Jonesington, 2007). They were pleading guilty to fraud and conspiracy and charges.

The WorldCom’s Failure

The Chief Executive Officers, Bernard Ebbers was the source of all problem occurred in WorldCom. He is convicted for the amount of eleven billion dollars accounting fraud in...