In modern day business, there can be so many pressures that can cause managers to commit fraud, even though it often starts as just a little bit at first, but will spiral out of control with time. In the case of WorldCom, there were several pressures that led executives and managers to “cook the books.” Much of WorldCom’s initial growth and success was due to acquisitions. Over time, WorldCom discovered that there were no more opportunities for growth through acquisitions when the U.S. Department of Justice disallowed the acquisition of Sprint. In the 1990s, the telecommunications market was rapidly changing with the addition of new entrants from a competition standpoint that were forcing WorldCom to decrease prices. Long term leases for …show more content…
The auditors were more concerned with keeping the WorldCom account and should have been unbiased and independent in their decisions. Andersen even undercharged WorldCom as he looked at is as a bond in their long term relationship. Andersen’s “more efficient” method of auditing after WorldCom’s operation expansion skipped detailed individual transactions for …show more content…
Although many of her actions were parallel with fellow manager in General Accounting Troy Nordmand’s, he did not receive a prison sentence due to the fact that he attempted to leave the company (although Vinson did initially plan to resign). Conversely, Vinson was sentenced to five months in prison and five months of home detention. One particularly interesting aspect of Betty Vinson’s case is the inclusion of her concerns over taking home pay and having health insurance, in addition to the fact that she had a positive reputation and was known for doing “anything you told her”. While it is normal to have concerns over job security, the emotional appeals in her situation add a different side to the story. One could argue that she is a victim -- she could have been targeted due to her reputation, or that fear drove her to do things she otherwise would not have considered. The issue here, however, is that she facilitated the fulfillment of Sullivan’s requests and pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud. As far as the case specifies, despite any superior’s knowledge of Vinson’s tendencies, she was not absolutely forced to do or not do anything. Because she committed the crime and pleaded accordingly, the criminal charges and consequent sentencing was both expected and
Of particular importance is the deregulation of the telecommunications industry as mentioned in the act (“Implementation of the Telecommunications Act,” NTLA). This reflects a new thinking that service providers should not be limited by artificial and now antique regulatory categories but should be permitted to compete with each other in a robust marketplace that contains many diverse participants. Moreover the Act is evidence of governmental commitment to make sure that all citizens have access to advanced communication services at affordable prices through its “universal service” provisions even as competitive markets for the telecommunications industry expand. Prior to passage of this new Act, U.S. federal and state laws and a judicially established consent decree allowed some competition for certain services, most notably among long distance carriers. Universal service for basic telephony was a national objective, but one developed and shaped through federal and state regulations and case law (“Telecommunications Act of 1996,” Technology Law). The goal of universal service was referred to only in general terms in the Communications Act of 1934, the nation's basic telecommunications statute. The Telecommunications Act of 1996 among other things: (i) opens up competition by local telephone companies, long distance providers, and cable companies ...
Roth was in charge of emergency of Nortel, be that as it may it was affected by both individuals and capital business sector forms. Roth settled on the choice to change Northern Telcom to Nortel and put resources into the web notwithstanding doubt and uncertainity from numerous individuals. The Board of Directors of this organization didn 't know about the money related status of the association which demonstrates that the executives, Roth as CEO, and workers didn 't know about great business hones. Business includes a system of human communications (Collins, 2011). The ascent of Nortel was to some degree from the consideration the organization got from the media and the financial specialists. This consideration affected the choices that Roth
More and more corporate scandals are happening in America. Why have these scandals just shown up in recent years? What causes these corporations to lie and be deceitful towards investors? Though once seen as legitimate, fair, honest, and respectable, corporations have arrived at a stage of greed and deception. This can be explained by a number of factors such as how the stock market works, the stock market boom, changing company practices, CEO benefits, and specific company examples.
The company has a culture of unquestioning when something wrong surfaced in the company. Take for example the Lockheed documents incident, where the 25000 documents were seen in the company for nearly 3 years before someone voiced his concerns regarding it. This unhealthy culture not only allows unethical practices to prevail, it also hinders company’s growth.
Lyke, B., & Jickling, M. (2002, August 29). WorldCom: The Accounting Scandal (Report). Retrieved from U.S Department of State: http://fpc.state.gov/documents/organization/13384.pdf
WorldCom started as a small long distance telephone service provider in 1983. In the 1990’s, companies were able to attain cheap and plentiful financing. This allowed them to quickly build transcontinental and transoceanic fiber optic networks. This allowed the company to grow financially and increase its customer base. In 1997, WorldCom merged with MCI Communications to become the second largest long distance telephone service behind AT&T. The merger of WorldCom and MCI was the largest corporate merger in US history at that time. Over the next six years, MCI WorldCom successfully acquired 65 other companies in order to expand their services and capabilities even more. Increasing its capacity helped keep WorldCom’s prices lower for its services,
...ent expense the year it incurred. Due to the reporting error, in 2001 $3.055 billion was misclassified and 4791 million in the first quarter of 2002 (Law Maryland). In order to avoid getting caught, WorldCom was trying to be slick by leaving some line costs as current expense so that the error in classifying would not be easily detectible. This error in classifying expenses cause WorldCom to increase net income and assets. This fraud was found by the companies internal audit, Cynthia cooper, on May 2002. This detection was not good news to Arthur Anderson as they were the outside auditors of WorldCom. Anderson had already been affected by Enron scandal and neglecting to do to their job correctly. But with WorldCom they claimed that the chief financial officer Scott Sullivan did not tell them about the line costs being capitalized and they were unaware of this fact.
Background One. Tel was launched by Jodee Rich and Brad Keeling in 1995 (Cook, 2001). At first, it looked to get the advantages from deregulation of the telecommunication industry by reselling other network’s capacity and making money through stock market speculation. Rich and Keeling tried to increase the company’s shares rather than profit the company (Cook, 2001). Initially, One.
Lyke, B and Jickling, M. (2002). WorldCom: The Accounting Scandal. CRS Report for Congress, p2.
WorldCom’s network could not directly connect to every possible phone and electronic device in the world. As a result, the company had to utilize third parties to carry some part of their calls. WorldCom would have to lease the facilities of the 3rd parties. These fees were referred to as “line costs.” Line costs accounted for about half of WorldCom’s total expenses. Taking this fact into account, managing line costs was important to WorldCom’s bottom line. WorldCom management met in quarterly line cost meetings. In these meetings management was pressed for line costs reduction ideas. As economic conditions worsened, the search for cost savings became more intense and Ebbers and Sullivan became agitated and raised their voices demanding improved margins” (Zekany, Braun and Warder 104).
The telecommunications industry is changing creating the need for a more competitive company. The changes that are happening are that there is greater competition in the market with foreign firms such as China Netcom and China Telecom are entering the UK market[1] increasing the number of firms. Also the European Union is looking to improve competition by breaking open the telecommunication markets further by giving national authorities stronger powers[2]. The type of competition is also changing in recent times as firms grow in size and capability as they merge. The recent trend being the buy out broadband and telephone companies so that firms are then able to offer bundled services[3].
In an interview by the New York Times, Susan Kalla (2002) said, “Bernie was endearing, but he didn’t even have a working knowledge of the business”. WorldCon’s newly acquired companies never consolidated into a single enterprise, which affects the day-to-day function of the company (Eichenwald, 2002). Without solid growth in the core business activities, accounting mishaps would be the only way to manipulate company earnings in order to meet those aggressive targets required to keep the company stock prices
For those who do not know what fraud is, it’s basically deception by showing people what they want to see. In business it’s the same concept, but in a larger scale by means of manipulating figures that will be shown to shareholders and investors. Before Sarbanes Oxley Act there was “Enron Corporation”, a fortune 500 company that managed to falsify their statements claiming revenues over 101 billion in a span of 15 years. In order for us to understand how this corporation managed to deceive the public for so long, the documentary or movie “Smartest Guys in the Room” goes into depth by providing viewers with first-hand information from people that worked close with or for “Enron”.
The Tyco accounting scandal is an ideal illustration of how individuals who hold key positions in an organization are able to manipulate accounting practices and financial reports for personal gain. The few key individuals involved in the Tyco Scandal (CEO Kozlowski and CFO Swartz), used a number of clever and unique tactics in order to accomplish what they did; including spring loading, manipulating their ‘key-employee loan’ program, and multiple ‘hush money’ payouts.
One of the example , is “many leases required WorldCom to make fixed monthly payments regardless of whether WorldCom or its customers actually used the leased lines” (Wilmarth, 2007, p.144). the Accounting misconducts was taken place in WorldCom included but was not limited to announce the higher revenues that the actual amount through drawing down accounting reserves that included reserves related t mergers (Hayes, 2011). Specifically, many violating GAAP standards, WorldCom accountants have used more USD 3.3 billion or more of the reserves to absorb the line costs in order to report a lot of earning during the period of 1999 – 2011.