ipl-logo

The Worldcom Fraud Case

2107 Words9 Pages

Background WorldCom, once known as one of the most powerful telecommunication organizations of the world, is now studied as a case of a fraudulent company that carried out unethical financial activities to cover its weakening position in the market. After some aggressive investment decisions, the company started to witness huge financial pressure. The management used various forged accounting entries to conceal its weakening position. Cynthia Cooper, Vice President Internal Audit, discovered the unethical activities and raised the issue with the management and relevant departments and received bitter responses. She carried out internal audits in her own capacity with her colleagues and compiled evidence against fraudulent activities. The Core …show more content…

This three element fraud is often referred as a fraud triangle by the researchers (Cohen, Ding, Lesage & Stolowy, 2010, p. 276). On the other hand the theory of planned behavior focuses on the intentions behind the planned behavior. Ajzen (1991, p. 188) explains this as “attitude toward the behavior… refers to the degree to which a person has a favorable or unfavorable evaluation or appraisal of the behavior in question”. Cohen, Ding, Lesage & Stolowy (2010) have combined the fraud triangle and theory of planned behavior to understand that how the two theories can be collectively studied to find out the reasons behind the unethical activities that results in corporate frauds. Cohen, Ding, Lesage & Stolowy (2010) in their work studied various organizations including WorldCom and identified following: • WorldCom’s management had an excessive interest in maintaining the entity’s stock price and earning trends (p. 287). • The CEO personality influenced the CFO of the organization (p.

Show More
Related
425 Words | 2 Pages

He also rationalized his fraudulent activities by hiding the customer’s late payment in order to be benefitted himself, but said that he was helping people more than he was helping himself. 2. Given that Mr. Pavlo’s fraud was restricted to an accounts receivable embezzlement scheme, what symptoms might auditors observe?

Read More
506 Words | 3 Pages

A sad day for the family of a young woman named Wykesha Reid, evidence conducted from an ongoing investigation lead to her death from butt-injections. The suspect being charged with the Homicide of Mykesha are Jimmy Clarke and Denise Rochelle. The two suspect operate a business which provide eyelash extensions to the public. Nevertheless, up until the death of Wykesh Reid it seems their business have been performing butt-injections on the Black Market. Upon questioning Jimmy Clarke a transgender woman told detectives that.

Read More
1256 Words | 6 Pages

The Plutus and ATO fraud cases involved tax fraud. Plutus is a payroll company that a criminal syndicate used to obtain $165 million that was meant to be paid as taxes. Plutus undertook to process the payrolls of legitimate companies. The money was taken from the clients and transferred to several subcontracted companies. These tier two companies made payments to the employees of the clients.

Read More
153 Words | 1 Pages

Greed is the only option that can support Bernie Madoff decision on becoming a criminal. He was already well off from the start of his parents under the table schemes he just wasn’t satisfied. According to biography.com the Madoff parents seems to have started their under the table schemes in the 1960s when he was just a child, they started when his mother registered as a broker-dealer and listed their home as an office and called the company Gibraltar Securities following that the SEC forced the closure of the business for failing to report its financial condition. The only thing that can refute he did the right thing by engaging in fraud was he was following his mother guide on running the business and his business traits were passed down

Read More
839 Words | 4 Pages

In response to the incident, the company implemented many security measures to protect against future breaches. In addition, the company has experienced a limited amount of internal fraud. Most cases involved employees attempting to steal cash from the company or manipulate the company’s financial

Read More
970 Words | 4 Pages

In the Madoff case, as a leader of the organization, he had sufficient power to plan the internal control system and corporate governance in such a manner that would only be favorable to him. It was found that the segregation of duties in Madoff scheme was not present (Fuerman 2009). The last element of fraud triangle is rationalizations - it is important to note how the individual is justifying the act committed by him. Day (2010) evaluates that Madoff was practicing this scheme firstly for his own benefit and for the benefit of his family by taking advantage of investors. However, Henriques (2012) argues that for all the banks and funds that Madoff had cheated on, they should be aware there are some issues in the plan as they were monetary

Read More
902 Words | 4 Pages

1. What factors in the WorldCom case support the conclusion that CEO Bernie Ebbers Knew about the financial statement fraud? What factors support his defense that he did not know about the fraud? Bernie Ebbers Knew about the financial statement fraud because he was the one who encourage others to go into financial fraud because of the stock prices were going down, which was affecting his marginal loan. For that reason, he was trying to sell his stock, but the board of Directors lent him $341 million, along with 2% interest rate.

Read More
319 Words | 2 Pages

Prospective jurors believe that Martin Shkreli is "the face of corporate greed in America." Shkreli, best known for raising the price of life-saving pharmaceuticals, is charged in links with securities fraud. Prosecutors say he manipulated investors in one company and then overcharged his other company to pay them back. Shkreli’s defense attorneys, however, arrest that he paid them back.

Read More
605 Words | 3 Pages

On 26th June 2002, the SEC has filed fraud charges against WorldCom. The SEC also filed a proposed settlement of claim for civil penalty on WorldCom in May 2003. The Commission has claimed that Worldcom practiced undisclosed and improper accounting and has misled their investors from at least as early as 1999, thus resulted in overstate of its income. The Oklahoma Attorney General filed charges against WorldCom and Ebbers for violating securities laws by providing investors with false financial information in August 2003. Ebbers pleaded not guilty, but he was found guilty by the SEC in March 2005 on all counts of conspiracy, securities fraud and filing false documents and was sentenced to 25 years in prison on 13th July 2005.

Read More
1491 Words | 6 Pages

The fraud triangle is made up by three distinguished elements. These elements in the fraud triangle consist of pressure, opportunity, and rationalization. The overall representation of the fraud triangle can be seen as the specific model to spot any type of high-risk unethical and fraudulent performances being conducted by a company, in this case Cendant Corporation. Cedant Corporations actions can be analyzed by the fraud triangle by the way that their senior management/top management decisions fell into the three categories of pressure, rationalization, and opportunity. Cendant Corporation had the pressure to comply with their shareholders and to maintain a stable financial status to prove that they were a profitable organization with a bright company image.

Read More
2178 Words | 9 Pages

Executive Summary Lehman Brothers were an investment bank involved in transactions worth billions of dollars and one of the most powerful investment banks in the world. Lehman Brothers collapsed in 2008 following bad investment in the sub-prime mortgage market and used bad accounting practices called Repo 105 transactions to try and cover up the bad assets. This report sets out the use of the fraud triangle when describing the actions which led to the collapse. The pressure applied on the bank, the opportunity due to the lack of regulation to carry out the actions and the ability of the bank to rationalise their decision making.

Read More
1635 Words | 7 Pages

This is evident in that ADM did not comply with the framework set out for the business, therefore issues such as accountability, fairness and transparency have been misused and unethical actions were carried out .For example we see Mark Whitacre forging signatures and being able to make unauthorised payments. Therefore the primary characteristic of good corporate governance which is accountability has been violated. This action is immoral and amounts to unethical behavior. Furthermore, employees in ADM were expected to accept kickbacks via cheques.

Read More
468 Words | 2 Pages

Recently Wells Fargo’s scandal of creating phony accounts has raised ethical concerns in the corporate world. Wells Fargo employees opened more than two million unauthorized bank and credit card accounts to meet sales projections. The company was charged with huge fines and earned a bad reputation that will take years to rebuild. According to the Deontological perspective on ethics least some acts are morally obligatory.

Read More
807 Words | 4 Pages

1.Facts of corporate scandals Olympus Olympus is the Japanese-based manufacturer specialized in optical technology product. In 2011, the company hired a british CEO, Michael Woodford who after that investigated into the huge advisor fee of $687 million in transaction to acquire Gyrus. There were several questions about these acquisition transactions seeking for answer from the board of director but they simply dismissed him as CEO after 2 weeks working without any explanation. With the assistance of PwC, Woodford had submitted his finding and PwC reports to FBI and Serious Fraud Office for further investigation (Carozza 2012).

Read More
1317 Words | 6 Pages

Section 1: Fraudulent financial reporting is the premeditated and calculated falsification or omission of financial information/documents such as: balance sheets, income statements, etc. The ultimate goal for a firm to falsify financial reports is to improve their profitability and ultimately their performance of the firm. By firms falsifying and omitting information from their financial reports, they are misrepresenting themselves to their investors. If a firm looks as if they are performing well, then more people will want to invest in the firm. The people who are being hurt at the end of the day are not the people at the top of the firm, CEOs and management, the people who are being hurt are the investors that will untimely lose their investments and the employees who work at the firm.

Read More

More about The Worldcom Fraud Case

Open Document