History of Worldcom

1. A Presentation By-
Vikas Singh
Tushar Singh
Bevan
Aayush Jain
Jatin

3. Company Details
• Founded by Bernard John Ebbers.
• Began as Long Distance Discount Services, Inc. (LDDS) during 1983,
based in Jackson, Missisippi.
• For a time, WorldCom was the US’s second largest long
distance telephone company (after AT&T).

4. What was Worldcom into?
• Telecommunication Services
• Internet Services
• Long-distance telephone services which were comparatively cheaper
than the competitiors.

5. The Rise of Worldcom
• WorldCom took the telecom industry by storm when it began a frenzy
of acquisitions in the 1990s.
• Till 2000, WorldCom purchased over 60 other firms. In 1997,it
bought MCI for $37 billion.
• WorldCom moved into Internet and data communications.
• By 2001, WorldCom owned one-third of all data cables in the United
States. In addition, they were the second-largest long distance carrier
in 1998 and 2002.

6. The Fraud

7. • Worldcom classified over $3.8billion in payments for line costs as
capital expenditures rather than current expenses.
• Irregularities in the reserve accounts.
• SEC claims that the total for fraudulent accounting comes to $9 billion
dollars.

8. The Man Behind The Fraud
Bernard Ebbers
(CEO, Worldcom)

11. Fall of Worldcom
• The company began to fall in 1999 with massive lay offs and the
steady decline of it’s stock price.
• Stock prices for WorldCom were around 60 dollars and dropped to
pennies in 2002 giving sleepless nights to investors.
• Business sector mergers were unsuccessful.

12. The stock price had fallen from around 60$ in 1999 to $1 in 2002

13. Aftermaths
• Chief Financial Officer Scott Sullivan and Controller David Myers
arrested.
• Myer’s pleads guilty to three counts of conspiracy
• Chief Executive John W. Sidgmore steps aside from his post
• Buford Yates Jr. pleads guilty to two counts of securities fraud
• Betty L. Vinson and M. Normand, former finance officials, are
charged with conspiracy.
• Six other WorldCom directors resign on December 18th

14. Role of Government
• Despite conspiracy charges and uncovered financial fraud the
government still keeps WorldCom’s eligibility to file for bankruptcy.
• The U.S. gives $2 billion dollars in assets to tap.
• $20 million dollars over the span of three years given to new CEO
• WorldCom still allowed to oversee government projects.

15. Impact
• Overall investor distrust with companies undergoing similar
problems.
• National feeling that the stock market is not as safe as previously
thought.
• SEC forced to keep a closer look on auditor and accountant dealings.

16. What Happened After the Fraud?
• WorldCom was renamed MCI in 2004 when it emerged from
bankruptcy.
• Company could spin off several business units.
• Added additional board members to serve on a special investigative
panel to review accounting practices.
• WorldCom may write off $50.6 billion in intangible assets.
• WorldCom is trying to secure loans.
• 17,000 jobs cut to save $1 billion.

17. What do we conclude?
In a way this proves some of the negligence of the government. With so
much financial fraud going on at the time in huge multi-billion dollar
corporations, investors would have suspected a little better job at
finding problems in the system. Accounting practices like these not only
install distrust in financial institutions but also in government factions
like the SEC that were created and funded for the sole purpose of
preventing things like this from happening.