Worldcom Scandal
This paper will explain the fraudulent accounting practices that led to the collapse of Worldcom. Other objectives of this paper will be to demonstrate how these activities were able to go undetected. Also, what motives drove the individuals involved to commit these acts. And finally the ethical accounting issues involved. Worldcom got its start as a small discount long distance provider in Mississippi. Founded by Bernard Ebbers and a number of others the idea for Worldcom was simple, buy long distance services from larger companies and then sell them off to small local ones. The idea worked and before long LDDS or Long Distance Discount Services, later to be called Worldcom was off and running. The company began acquiring small telecommunications
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Although it is not my intention to get involved in the legal aspects involved with this matter it is of mild importance to mention that both the CEO and CFO along with a handful of other employees were found guilty of numerous charges and face huge fines and jail time. Knowing that and knowing that they might get into serious trouble for their actions, why would they commit fraud? Obvious motives include greed and or pressure to please investors and creditors. It is hard to know for sure but the above mentioned most likely played a role. However, it is important to look into the background of these people to see if their decisions were persuaded in part by lack of knowledge or experience. In the case of CFO Scott Sullivan, he went to school for business, and was knowledgeable in accounting. However, lacked experience expected from an important executive. But still had to understand he was making some pretty risky decisions. On the other hand, Bernard Ebbers grew up caring more about basketball and went to pretty much the only college that would let him play. He attended Mississippi College, and graduated with a degree in physical education. After college he coached high school basketball for a while and eventually invested with a few friends into a motel, he grew this business and eventually had a few motels. He started Worldcom in 1983; its success was due to good timing, help from Wall Street big wigs interested in the telecommunications industry, and Ebbers ability to be a great salesman. This is important because Ebbers never had a true business background, was not educated or well versed in finance or accounting. He was not the typical corporate executive, but he was all of a sudden running the second largest telecommunications firm in the world. He also had no background
Although it is not my intention to get involved in the legal aspects involved with this matter it is of mild importance to mention that both the CEO and CFO along with a handful of other employees were found guilty of numerous charges and face huge fines and jail time. Knowing that and knowing that they might get into serious trouble for their actions, why would they commit fraud? Obvious motives include greed and or pressure to please investors and creditors. It is hard to know for sure but the above mentioned most likely played a role. However, it is important to look into the background of these people to see if their decisions were persuaded in part by lack of knowledge or experience. In the case of CFO Scott Sullivan, he went to school for business, and was knowledgeable in accounting. However, lacked experience expected from an important executive. But still had to understand he was making some pretty risky decisions. On the other hand, Bernard Ebbers grew up caring more about basketball and went to pretty much the only college that would let him play. He attended Mississippi College, and graduated with a degree in physical education. After college he coached high school basketball for a while and eventually invested with a few friends into a motel, he grew this business and eventually had a few motels. He started Worldcom in 1983; its success was due to good timing, help from Wall Street big wigs interested in the telecommunications industry, and Ebbers ability to be a great salesman. This is important because Ebbers never had a true business background, was not educated or well versed in finance or accounting. He was not the typical corporate executive, but he was all of a sudden running the second largest telecommunications firm in the world. He also had no background