WORLDCOM SCANDAL

Telecommunications company; now MCI, Inc.

Info.

1. Located in Ashburn, VA

2. Revenue: $20.6 billion

3. Parent company: Verizon

4. CEO: Bernard Ebbers

5. They are a telecommunications company.

What Happened?

Bernie Ebbers inflated assets by as much as $11 billion, leading to 30,000 lost jobs and $180 billion in losses for investors.

Main players in the scandal

Bernard Ebbers, the CEO of WorldCom

Penalties

Bernie Ebbers was sentenced to 25 years in a low security prison. The earliest he could be released is July 2028, at which time he will be 87 years old.

How they did it

Ebbers under reported line costs by capitalizing rather than expensing, and inflated revenues with fake accounting entries.

How they got caught

WorldCom's internal auditing department uncovered $3.8 billion in fraud.

Fun Facts

  1. A large reason for this scandal was Ebber's desire to show large growth in the company which could not have been attained in a legal manner.
  2. The frauds were a large part of Ebber's business strategy which consisted of impressive growth through acquisitions.
  3. After the scandal, Congress passed the most sweeping new set of business regulations since the 30s.