WorldCom Scandal


of the Facts

WorldComScandal was an accounting fraud propagated by Bernie Ebbers, thefounder and former president of the organization. He had used hisstock at the organization to secure loans, therefore, he had to makehis shares appear that they were gaining value to prevent marginalcalls on his monetary state. As a result, Ebbers masterminded cookedaccount figures so that his stock could make his stock appear as ifit is continuously gaining value. Consequently, they inflated theassets of the company by 11 billion dollars (Stefano, 2005). Issue

WorldCommade significant financial misstatements that made the monetary ofthe company appear healthy. The report concerning the fraud assertedthat over 9 billion dollars recorded in the system could not beaccounted for. The result of the unethical entries was substantialloss for the shareholders.


Ithe early 1990s, WorldCom aimed to achieve significant growth throughacquisition. The peak of its acquisition was MCI Company that hadover two and a half higher revenue than it. Unfortunately, thetelecommunications industry growth began to decline in early 2000s.Besides, the management had not acquired adequate skills to managethe newly acquired businesses while Wall Street expected the companywould develop at the rate of double digit. The desire to accomplishWall Street expectations made the CEO, Ebbers, to doctor figures thatmade his organization appear as if it was doing well financially.Finally, the company had to file for bankruptcy protection since itcould not retain the deception. The stakeholders lost over 180billion while over 30,000 employees lost their jobs (Stefano, 2005).

Ruleof Law

TheBankruptcy court ordered the company to elect new Board of Directorsto track the problems and correct the financial anguish. The fraudwas associated with inadequate control and correction of the seniormanagement. Bernie Ebbers was sentenced to 25 years imprisonment in2005 because breached the state’s securities regulations that ledto massive loss for the investors (Stefano, 2005).


WorldComscandal is among the biggest accounting frauds in the US history,Former senior management staff in the organization faced criminalcharges and long jail terms. For instance, Bernard Ebbers wassentenced to 25 years imprisonment at the age of 63 while ScottSullivan, the CEO was incarcerated for five years because he pleadguilty and agreed to testify against his boss.


Stefano,T.F. (2005, August 19). WorldCom`s Failure: Why Did It Happen?eCommerceTimes.Web. Retrieved on April 26, 2015 from