Case Study : The American Telecommunications Company Essay

1986 Words Oct 5th, 2014 8 Pages
Originally founded in 1983 as LDDS Communications, today, MCI, Inc. is known as the American telecommunications company that was originally formed as a result of the merger of WorldCom. Currently, MCI, Inc. is headquartered in Ashburn, Virginia but originally WorldCom was headquartered in Clinton, Mississippi (Reardon, 2006). WorldCom’s growing success through acquisitions of other telecommunications firms led it to become the second largest long distance telecommunications company in 2001. However, on June 21, 2002 the aspiring company filed for bankruptcy protection after disclosures displayed accounting regularities. On June 25, 2002, they announced that it had overstated earnings in 2001 by more than $3.8 billion (Lyke & Jickling, 2002). The next day, U.S. Securities and Exchange Commission (SEC) “charged the company with massive accounting fraud and quickly obtained court order barring the company from destroying financial records, limiting its payments to past and current executives, and requiring an independent monitor” (Lyke & Jickling, 2002). The lack effective management and ethical accounting from, CEO Bernard J. Ebbers, the board of directors, internal auditors, and external auditors resulted in one of the most significant accounting frauds in history.

FINANCIAL ACCOUNTING FRAUD Through the achievement of 65 acquisitions, the company collected $41 billion in debt (Moberg & Romar, 2006). However, as WorldCom began to be a major supplier of Internet…

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