Fraud at WorldCom
M1. Case Study Assignment: Fraud at WorldCom
1. Who were the major characters in WorldCom?
There are a couple of major characters that played their roles in the downfall of WorldCom. Mr. Bernard J. (Bernie) Ebbers, one of the founders of the original small long-distance carrier, was asked to take charge of the company during its early struggles. It was under his tenure that WorldCom began its expanding pursuits and aggressive acquisitions. Although Mr. Ebbers was he head of the company, their CFO, Scott Sullivan, was the person who actually handled the acquisitions. Under Mr. Sullivan’s questionable accounting techniques, WorldCom was able to experience both the initial thriving conglomerate status on Wall Street and eventually one of the biggest financial collapses in American history.
The turning point for WorldCom came in October of 2000 when the company could not make enough profits through their acquisition methods to meet the analysts’ expectations. To make it look like they were still generating enough revenue to the public, the controller, David F. Meyers, and the accounting director, Buford Yates Jr., were both ordered by Scott Sullivan to misdirect the company’s finances. The initially took funds that were already set aside and put it back into their business through line expenses. However, they could not just willingly take the money from the reserves and transfer it to their current revenues without manipulating the accounting entries. To make sure that the “growth” of the company looked authentic in the books, they influenced on of their accountants, Betty Vinson, to maneuver the accounting entries and moved the funds for them.
2. What ethical issues did they face?
The disastrous collapse of WorldCom and how it was handled by the major key players of the company was also confronted with multiple ethical issues in both the market level as well as the management level. It’s easier to see the unethical issues in the market level because of how
1. Who were the major characters in WorldCom?
There are a couple of major characters that played their roles in the downfall of WorldCom. Mr. Bernard J. (Bernie) Ebbers, one of the founders of the original small long-distance carrier, was asked to take charge of the company during its early struggles. It was under his tenure that WorldCom began its expanding pursuits and aggressive acquisitions. Although Mr. Ebbers was he head of the company, their CFO, Scott Sullivan, was the person who actually handled the acquisitions. Under Mr. Sullivan’s questionable accounting techniques, WorldCom was able to experience both the initial thriving conglomerate status on Wall Street and eventually one of the biggest financial collapses in American history.
The turning point for WorldCom came in October of 2000 when the company could not make enough profits through their acquisition methods to meet the analysts’ expectations. To make it look like they were still generating enough revenue to the public, the controller, David F. Meyers, and the accounting director, Buford Yates Jr., were both ordered by Scott Sullivan to misdirect the company’s finances. The initially took funds that were already set aside and put it back into their business through line expenses. However, they could not just willingly take the money from the reserves and transfer it to their current revenues without manipulating the accounting entries. To make sure that the “growth” of the company looked authentic in the books, they influenced on of their accountants, Betty Vinson, to maneuver the accounting entries and moved the funds for them.
2. What ethical issues did they face?
The disastrous collapse of WorldCom and how it was handled by the major key players of the company was also confronted with multiple ethical issues in both the market level as well as the management level. It’s easier to see the unethical issues in the market level because of how