WorldCom was a provider of long distance phone services to businesses and residents. It started as a small company known as Long Distance Discount Services (‘LDDS’).
Due to acts of CEO Bernie Ebbers, there were inflated assets by $11 billion, leading to 30,000 lost jobs and $180 billion in losses for investors.
Underreported line costs by capitalizing rather than expensing, and inflated revenues with fake accounting entries.
WorldCom’s internal auditing department then discovered what a loss of $3.8 billion
Ousting of CEO and filing for Chapter 11(Bankruptcy).
FLOW OF EVENTS
WorldCom shows signs of financial troubles: rates and revenues decline and debt rises.
WorldCom receives $2.65 billion in loans from 26 banks to be repaid by the end of 2001.
Apr. 30, 2002
Bernard Ebbers resigns as CEO of WorldCom and is replaced by vice chairman John Sidgmore.
Jun. 25, 2002
CFO Scott Sullivan is fired after improper accounting of $3.8 billion in expenses covering up a net loss for 2001 and the first quarter of 2002 is discovered.
Jun. 28, 2002
WorldCom fires 17,000 employees to cut costs.
Jul. 21, 2002
WorldCom files for reorganization under Chapter 11 Bankruptcy, an action that affects only the firm’s U.S. operations, not its overseas subsidiaries.
Aug. 9, 2002
Continued internal investigations uncover an additional $3.8 billion in improperly reported earnings for 1999, 2000, 2001, and the first quarter of 2002, bringing the total amount of accounting errors to more than $7.6 billion.
Nov. 8, 2002
WorldCom files additional bankruptcy petitions for 43 of its subsidiaries.
Nov. 15, 2002
Michael D. Capellas, former president of Hewlett-Packard Company, is named chairman and CEO.
Mar. 14, 2003
WorldCom announces that it will take one-time $79.8 billion write-off.
May 19, 2003
WorldCom agrees to pay investors $500 million to settle civil fraud charges.
Jul. 7, 2003
A federal judge approves a $750 million settlement between WorldCom and federal regulators.
Jul. 31, 2003
The General Services Administration notifies WorldCom that it is ineligible to win new federal contracts until it improves accounting controls.
Aug. 6, 2003
A bankruptcy judge approves a $750 million settlement of civil fraud charges made by the Securities and Exchange Commission on WorldCom investors' behalf.
Aug. 12, 2003
WorldCom appoints former AT&T Corp. executive Richard R. Roscitt as its new president and chief operating officer.
Dec. 22, 2003
Federal prosecutors say they intend to show that former CFO Scott Sullivan was involved in 13 kinds of accounting fraud in addition to financial wrongdoing
Jan. 7, 2004
The government lifts the suspension that prevented WorldCom from receiving new federal contracts.
Apr. 20, 2004
MCI officially emerges from bankruptcy, 21 months after filing the largest Chapter 11 case in history.
May 10, 2004
MCI says it will eliminate 7,500 jobs (15 percent of its workforce).
Feb. 14, 2005
Verizon Communications Inc. announces a $6.75 billion deal to buy MCI Inc.
Mar. 15, 2005
Former WorldCom CEO Bernard J. Ebbers is found guilty of conspiracy, securities fraud, and making false filings with regulators. He is sentenced to 25 years in prison.
Aug. 11, 2005
Former CFO Scott Sullivan is sentenced to five years in prison.