Worldcom Essay

2275 WordsNov 25, 201210 Pages
ACCT 107 This essay explains the fraudulent accounting activities which caused the collapse of Worldcom. LDDS (Long Distance Discount Services) was formed by Bernard Ebbers, Bill Fields, David Singleton, and Murray Waldron in 1983 in Mississippi, in the city of Hattiesburg, and they expressed their idea for that company in a coffee shop drawing it on a napkin. At the beginning the company started as a small discount long distance provider simply purchasing long distance services from larger companies and later sold them to small local companies. The company's obtained profits depended on its realization of its lines costs per minute (transport charges and access charges) that were supposed to be less than its revenues.In August of 1989 the company became a public company. The company also started acquiring small telecommunications companies growing larger and larger. LDDS kept climbing up despite the economical situation in the early 1990s. The long-distance phone company was not affected adversely by the economic downturn since the company had already established its reputation in the business area. The company wanted to continue its aggressive growth strategy that included acquisitions and consolidations of other telecommunication industry companies.In 1995 LDDS after buying Williams Telecommunication changed its name and began operations as WorldCom, a giant in global industry servicing much of the world’s communications. With time progressing, the company acquired almost sixty other telecom firms, even including the $ 40 billion purchase of MCI in 1998 that was viewed as the largest merger in the 20th century. After the MCI acquisition the company handled more than fifty percent of all America’s internet traffic and held over one third of the data cable. WorldCom’s growth was stunning and it was the most widely held stock in America; soon it was

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