WorldCom
.pdf
School
Davao Doctors College**We aren't endorsed by this school
Course
BSA 234
Subject
Accounting
Date
Dec 21, 2024
Pages
18
Uploaded by CoachLeopardMaster269
WorldComP R E S E N T E D B Y :COMWORLDDagalea, Jude EarlGilay, John AlexisMoro, Hissam
ContentsHistory of the Company Successes Failures/Problems What happened? What was done tosolve these problems? Current SituationTable ofWorldCom
WorldComWorldCom CompanyWorldCom was an Americantelecommunications business. During itspeak, WorldCom was one of the majorlong-distance providers in the UnitedStates. The corporation is bestrecognized for its part in one of thecountry's largest accounting scandals,which followed the Enron and Tycocrimes. This came when it was uncoveredthat the corporation forged its financialrecords. WorldCom was also involved inone of the most massive bankruptcies ofall time. The company escaped frombankruptcy, renamed itself, and sold itsnetwork assets to Verizon.
WorldComFoundersMurray WaldronWilliam Rector Bernard Ebbers Scott Sullivan(CEO)(CFO)
SuccessesWorldComThrough the implementation of an aggressive acquisition strategy,WorldCom rose from its modest beginnings as a little-known longdistance phone company to become the second-largest long distancetelephone company in the United States and one of the largestcompanies handling worldwide Internet data traffic. By completing 65 acquisitions successfully, WorldCom was able to establishitself as a major player in the telecom sector. In order to acquire several ofthese businesses, WorldCom paid close to $60 billion between 1991 and 1997,accruing $41 billion in debt in the process. Among these acquisitions, two wereespecially noteworthy via the acquisition of MFS Communications, WorldComwas able to acquire UUNet, a significant business Internet service provider, andvia the acquisition of MCI Communications, WorldCom became one of theleading suppliers of business and consumer telephone service. WorldCom'sshares increased from pennies on the dollar to nearly $60 per share by 1997.
SuccessesWorldComThrough what appeared to be a prescient and successful businessstrategy at the height of the Internet boom, WorldCom became adarling of Wall Street. In the heady days of the technology bubbleWall Street took notice of WorldCom and its then visionary CEO,Bernie Ebbers. This was a company "on the move," and Wall Streetinvestment banks, analysts and brokers began to discoverWorldCom's value and make "strong buy recommendations" toinvestors.
The WorldCom scandal was a result ofaggressive accounting practices, rapidexpansion, lack of oversight, and pressure tomeet Wall Street's expectations. It wasexacerbated by weak internal controls,leading to one of the largest accountingscandals in history.Major Failures & ProblemsWorldCom Downfall Aggressiveaccounting practicesand fraudWorldComConspiracy of Fools: A True Storyby Kurt EichenwaldRapid and uncontrolledexpansion throughacquisitionsLack of oversightand governancePressure to meet Wall Street'searnings expectationsWeak internal controls andfinancial discipline
WorldCom's internal auditors discovered that thecompany misclassified $3.8 billion in regular operatingexpenses as capital expenditures between 1999 and2002, leading to inflated profits and misleadinginvestors.WorldCom's stock price plummeted after fraudrevelation, leading to bankruptcy on July 21, 2002, withinflated earnings estimated at around $11 billion.Key executives, including CEO Bernie Ebbers and CFOScott Sullivan, were indicted for securities fraud andconspiracy, with Ebbers sentenced to 25 years andSullivan reduced to a lesser sentence.WorldComWhat happened?
WorldComThe SEC filed civil charges, leading to a $2.6 billion settlement andWorldCom's bankruptcy. New regulations were implemented to improvecorporate governance and financial reporting, including the Sarbanes-Oxley Act in 2002. WorldCom emerged from bankruptcy in 2004 as MCI,which was later acquired by Verizon in 2006. The reforms aimed toaddress the lack of oversight, weak internal controls, and aggressiveaccounting practices that contributed to WorldCom's downfall.Resolved ThroughVarious ActionsConspiracy of Fools: A True Storyby Kurt Eichenwald
What is the currentsituation ?WorldComWorldCom is no longer in existence as the original company. Whenthe fraud scheme was finally discovered in 2002, it led to the collapseof WorldCom, which was later acquired by Verizon Communication. In January 2006, Verizon completed its acquisition of MCI. Thisstrategic move aimed to enhance Verizon's presence in theenterprise market and broaden its global reach. Post-acquisition,MCI's operations, assets, and customer contracts were integratedinto Verizon. This included MCI’s extensive fiber-optic network,which significantly bolstered Verizon’s infrastructure.
What is the currentsituation ?WorldComMCI’s assets included a vast fiber-optic network and a significantportfolio of business and government clients. This expandedVerizon’s ability to provide comprehensive telecommunicationsservices, including advanced data, internet, and voice services. Theacquisition strengthened Verizon’s position in the enterprise marketby adding MCI’s large corporate and government clients to itscustomer base.
ICEBREAKERAnswer or Consequences
Who is the Chief ExecutiveOfficer(CEO) of WorldCom?
Who is the Chief FinancialOfficer(CFO) of WorldCom?
What was the largestmerger that WorldComunderwent beforechanging its name?
Would you rather be the CEO of a company like WorldCombefore the scandal, enjoying immense success but riskingpotential downfall, or be the CEO after the scandal, facingthe challenge of rebuilding and restoring trust?A. CEO before the scandal, enjoying the success and highstock prices.B. CEO after the scandal, working hard to rebuild thecompany's reputation.
Would you rather deal with aggressive accounting practices thatcould potentially lead to high short-term gains but risk long-termlegal consequences, or maintain conservative accounting practices,ensuring long-term stability but with slower growth?A. Aggressive accounting practices with high short-term gains.B. Conservative accounting practices ensuring long-term stability.
ThankYou forListeningReferences: Conspiracy of Fools: A True Story by Kurt Eichenwaldhttps://internationalbanker.com/history-of-financial-crises/the-worldcom-scandal-2002/https://www.scu.edu/ethics/focus-areas/business-ethics/resources/worldcom/#:~:text=WorldCom%20achieved%20its%20position%20as,successful%20completion%20of%2065%20acquisitions.&text=Between%201991%20and%201997%2C%20WorldCom,accumulated%20%2441%20billion%20in%20debt.https://www.nytimes.com/2020/02/03/business/bernard-ebbers-dead.htmlhttps://www.nbcnews.com/id/wbna8907976