Accounting Fraud at Worldcomm
Introduction By June 2002, it had become evident to the SEC that WorldCom had engaged in a significant corporate accounting fraud scheme which had overstated pretax income by about $7 billion since 1999. At the time, this was the largest deliberate misstatement in US corporate history. Although there are many interesting elements and players involved with this incident, for the purpose of this case study I will focus on the role played by Betty Vinson, the Director of Management Reporting and a key figure in enabling the type of illegal behavior WorldCom was involved in. Betty Vinson is a native of Jackson, Mississippi, and joined WorldCom in 1996 when she was 40 years old. WorldCom’s corporate headquarters, as well as finance department, were located in Jackson as well at the time, which was a large benefit to Vinson and her family. Although she had only been at WorldCom for a few years, Vinson had developed a solid reputation as a hardworking, loyal employee who enjoyed the ability to live and work in her hometown. By the time WorldCom declared bankruptcy, she had been promoted to Director and was making around $80,000 per year. This salary made her the family’s main breadwinner and when considering the additional insurance benefits, as well as the lack of employment opportunities in Jackson, Vinson felt very fortunate to have such a position at WorldCom. Aside from Betty Vinson, the two other main players in the case are Bernard Ebbers, CEO, and Scott Sullivan, CFO. Ebbers lacked technological expertise or experience and, admittedly, stated his only real qualification was “being the meanest SOB they could find” (Kaplan and Kiron, 2007). However, Ebbers was the right man for the job during the companies’ infancy, since his aggressive M&A strategy took less than a year to make WorldCom profitable. However, in 1999 when the WorldCom - Sprint merger failed to materialize, it appeared a new growth strategy would be required. Unfortunately,
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