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 firms and grew larger and larger. By 1995, Worldcom was one of the largest long distance providers in the world. As time progressed they acquired more then sixty companies, including MCI. The MCI take-over in 1997 cost over thirty seven billion, at the time it was considered the largest merger in American history. After the MCI deal Worldcom became the second largest Telecommunications Company in the United States. They owned one third of the data cables and were handling over fifty percent of all internet traffic in the United States. The growth of Worldcom was amazing, and they were the talk of Wall Street. In fact, by the late 1990's they were the fifth most widely held stock in America. A pretty big feat for a company founded out of a small Mississippi town. Worldcom rode the big wave of the telecommunications and internet boom of the mid to late 1990's. Its shares were worth about $115 billion, more then double that of telecommunications giant AT&T. However, by the end of 1999 a huge slow down was ...