- Published: October 31, 2021
- Updated: October 31, 2021
- University / College: Middlesex University
- Level: Bachelor's Degree
- Language: English
- Downloads: 34
WorldCom financial scam was one of the biggest scandals with huge adverse ramifications on the US economy, banks, shareholders, suppliers and other telecommunication businesses. It was initially started in 1983 as Long Distance Discount Services by Bernie Ebbers and his nine associates, when telecom industry offered huge opportunities. Ebbers, with experience only in the hospitality industry, turned out to be an astute businessman with huge knowledge about bookkeeping. His take over as CEO in 1985 was followed by series of merger and acquisitions, resulting in rapid expansion and tremendous success. In 1995, it was renamed as WorldCom with ambitious plans for global expansion. In1996 it made efforts to acquire MCI, a much larger telecom company which was finally realized in 1998. By 1999, it was 14th largest firm in US.
The failed bid for Sprint, large telecoms provider in USA also started the downfall of WorldCom. The large number of acquisitions and mergers were not integrated within the broader culture of WorldCom. Consequently steady increase of complaints and lawsuits necessitated giving millions of dollars in penalties, refund and payments by WorldCom. This opened Pandora box which exposed manipulation of books and financial irregularities by Ebbers and other directors and amounting to billions of dollars of hard earned money of the investors and shareholders. The share price of $62 in 1999 fell to 7 cents in 2002. Over payment on sales commission, inflated cash flow of nearly 4 billion and false corporate book keeping led to nearly $30 billion in debt and finally to its bankruptcy. All its major directors were found guilty. In 2004, it emerged from bankruptcy as MCI with credible board members.
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