The WorldCom Accounting Scandal


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:

Case Code : FINC022 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate scams / Controversies
Case Length : 19 Pages
Period : 1990 - 2002
Pub. Date : 2002
Teaching Note : Not Available
Organization : WorldCom, Arthur Anderson
Industry : Telecom, Financial Services
Countries : USA

Abstract:

The case discusses the accounting frauds committed by the leading US telecommunications giant, WorldCom during the 1990s that led to its eventual bankruptcy. The case provides a detailed description of the growth of WorldCom over the years through its policy of mergers and acquisitions. The case explains the nature of the US telecommunications market, highlighting the circumstances that put immense pressure on companies to project a healthy financial position at all times. The case provides an insight into the ways by which WorldCom manipulated its financial statements. The case also describes the events that led the company to file for reorganization under Chapter 11 of the U.S. Bankruptcy Court in 2002.

The role of the company's top management in the scandal has also been discussed. Finally, the case explores the initiatives being taken by the company to change its management structure, improve its performance and restore investor confidence.

Issues:

Adverse business conditions often cause companies resort to unethical practices

Contents:

  Page No.
Worldcom 2002: Yet Another Corporate Scam 1
Worldcom: The Company 2
Worldcom: Genesis of the Frauds 4
Worldcom: The Ebbers Angle 6
Worldcom: The Final Countdown 7
Worldcom: Lessons From the Saga 8
Worldcom: The Aftermath 9
Exhibits 11

Keywords:

Accounting frauds, US telecommunications, giant, WorldCom, 1990, bankruptcy, growth, WorldCom, mergers, acquisitions, US telecommunications, healthy financial position, manipulated, financial statements, reorganization, Chapter 11, U.S. Bankruptcy Court, 2002,top management, scandal, management structure

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