Fraud at Worldcom

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On July 22, 2002, MCI WorldCom (hereafter known as WorldCom) filed for Chapter 11 bankruptcy, the largest filing in U.S. History at the time (Beltran, 2002). It is clear that senior-level executives were holding the reigns throughout the elaborate and, what one analyst called, “incredibly elegant (Simons, 2002),” scam, intended to defraud investors and Wall Street. To someone not familiar with accounting processes, the case becomes difficult to understand. The executives were falsifying accounting entries, both creating accounting line items that did not exist and counterfeiting actual entries to inflate earnings (Boatright, p.44). The 1990s proved to be an excellent decade for WorldCom, particularly after the 1997 purchase of MCI, which was the largest national long-distance phone carrier at the time, and resulted in the largest corporate merger in the history of the United States. Bernard Ebbers was credited with saving the fledgling company and the stock became extremely valuable. Much of the increase in stock value can be attributed to the creative accounting practices of Scott Sullivan, chief financial officer of WorldCom. Mr. Sullivan's methods were designed to increase the company's value and stock price though a series of acquisitions. The methods utilized gave the shareholders the image that WorldCom was a growing company with steadily-rising income that was reliable and would offer a large return for their investment (Boatright, p.44). Unfortunately for Sullivan and Ebbers, the accounting practices put in place at WorldCom only continued to work when new acquisitions were made (Boatright, p.44). In 2000, the Department of Justice and international anti-trust concerns halted the WorldCom Sprint merger, valued at $115 billion, though analysts at the time were not concerned for the future of the company. ''There are many chances for WorldCom to come out of

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