Financial Accounting
Due: April 17, 2008
MON & WED 2:00-3:45
WorldCom Case
WorldCom was an American telecommunication company back in the 1990's that made many successful mergers and then ran into serious problems with the SEC. In 1997 WorldCom merged with MCI communications for 37 billion dollars and became the second largest merger in US history. WorldCom was the second largest long distance phone service provider here in the US and also owned major part of the internet system servers. IN 1999 Sprint Corporation and MCI WorldCom announced a 129 billion dollar merger that would make the company the largest supplier of long distance calls but the department of justice was scared they would become a monopoly.
Former CEO at that time was Bernard Ebbers who was cashing in on his companies profit and he became very rich of WorldCom stocks. Around 1998 the telecommunication industry entered a downturn, and WorldCom without the Sprint merge had suffered a serious blow. At that time the stocks were beginning to drop and business was slow. CEO Ebbers came under a lot of pressure from he banks to cover margin calls and also investor wanted to see the stock prices high. By 2001 Bernard Ebbers had borrowed more than 400 million dollars to try to cover those margin calls. Ebber was able to get the loans because of the companies’ stock performance but as we found out a couple of years later they were using fraudulent account procedures to hide their true performance levels.
Beginning in 1999 and continuing through 2002, the company (under the direction of Scott Sullivan (CFO), David Myers (Controller) and Buford “Buddy” Yates (Director of General Accounting) used fraudulent accounting ...