Worldcom

The Failure of WorldCom

WorldCom was known as a telecommunication giant, established from nothing in 1983 to become the biggest accounting scandal in the United States (U.S.) history in 2002. According to Jones Jonesington (2007) says, “In 1998, the telecommunications industry began to slow down and WorldCom’s stock was declining which gave CEO Bernard Ebbers increased pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses endeavors" (timber, yachting etc.,) (Jonesington 2007). WorldCom took another big hit in 2000 when it was forced to abandon its merger with Sprint, says Jonesington (Jonesington, 2007) In 2001, Ebbers persuaded WorldCom’s board of directors to provide him with a nice corporate loan and guarantees, which totaled more than $400 million (Jonesington, 2007). Ebbers plan failed when he was ousted as CEO on April 2002, says Jonesington. Ebbers were not the only one to blame. There were many players involved in this scandal. WorldCom CFO Scott Sullivan, Controller David Myers and Director of General Accounting Buford Yates used questionable accounting methods to hide the financial condition by lying about the company’s financial growth and profitability to increase its stock.

In 1998, the telecommunications industry began to slow down and WorldCom's stock was declining. CEO Bernard Ebbers came under increasing pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses endeavors (timber, yachting, etc.). The company's profitability took another hit when it was forced to abandon its proposed merger with Sprint in late 2000. During 2001, Ebbers persuaded WorldCom's board of directors to provide him corporate loans and guarantees totaling more than $400 million. Ebbers wanted to cover the margin calls, but this strategy ultimately failed and Ebbers was ousted as CEO on April 2002.

Beginning in 1999 and continuing through May 2002,...