AccountingfraudatWorldComWord文档下载推荐.docx

AccountingfraudatWorldComWord文档下载推荐.docx

《AccountingfraudatWorldComWord文档下载推荐.docx》由会员分享，可在线阅读，更多相关《AccountingfraudatWorldComWord文档下载推荐.docx（44页珍藏版）》请在冰豆网上搜索。

OnJuly21,2002,WorldComGroup,atelecommunicationscompanywithmorethan$30billionin

revenues,$104billioninassets,and60,000employees,filedforbankruptcyprotectionunder

Chapter11oftheU.S.BankruptcyCode.Between1999and2002,WorldComhadoverstateditspre-

taxincomebyatleast$7billion,adeliberatemiscalculationthatwas,atthetime,thelargestin

history.Thecompanysubsequentlywrotedownabout$82billion（morethan75%）ofitsreported

assets.2WorldCom’sstock,oncevaluedat$180billion,becamenearlyworthless.Seventeenthousand

employeeslosttheirjobs;

manyleftthecompanywithworthlessretirementaccounts.Thecompany’s

bankruptcyalsojeopardizedservicetoWorldCom’s20millionretailcustomersandongovernment

contractsaffecting80millionSocialSecuritybeneficiaries,airtrafficcontrolfortheFederalAviation

Association,networkmanagementfortheDepartmentofDefense,andlong-distanceservicesfor

bothhousesofCongressandtheGeneralAccountingOffice.

Background

WorldCom’soriginscanbetracedtothe1983breakupofAT&

T.Small,regionalcompaniescould

nowgainaccesstoAT&

T’slong-distancephonelinesatdeeplydiscountedrates.3LDDS（anacronym

forLongDistanceDiscountServices）beganoperationsin1984,offeringservicestolocalretailand

commercialcustomersinsouthernstateswherewell-establishedlong-distancecompanies,suchas

MCIandSprint,hadlittlepresence.LDDS,likeotherofthesesmallregionalcompanies,paidtouse

orleasefacilitiesbelongingtothirdparties.Forexample,acallfromanLDDScustomerin

NewOrleanstoDallasmightinitiateonalocalphonecompany’sline,flowtoLDDS’sleased

network,andthentransfertoaDallaslocalphonecompanytobecompleted.LDDSpaidboththe

1MatthewBakarak,“ReportsDetailWorldComExecs’Domination,”APOnline,June9,2003.

2WorldCom’swritedownwas,atthetime,thesecondlargestinU.S.history,surpassedonlybythe$101billionwritedown

takenbyAOLTimeWarnerin2002.

3LynneW.Jeter,Disconnected:

deceitandbetrayalatWorldCom（Hoboken,NJ:

JohnWiley&

Sons,2003）,pp.17–18.

________________________________________________________________________________________________________________

ProfessorRobertS.KaplanandSeniorResearcherDavidKiron,GlobalResearchGroup,preparedthiscase.Thecasewasdevelopedfrom

publishedsourcesanddrawsheavilyfromDennisR.Beresford,NicholasdeB.Katzenbach,andC.B.Rogers,Jr.,“ReportofInvestigation,”

SpecialInvestigativeCommitteeoftheBoardofDirectorsofWorldCom,Inc.,March31,2003.Referencestothisreportareidentifiedby

alphabeticletterswhichrefertoinformationintheendnotes.HBScasesaredevelopedsolelyasthebasisforclassdiscussion.Casesarenot

intendedtoserveasendorsements,sourcesofprimarydata,orillustrationsofeffectiveorineffectivemanagement.

Copyright©

2004,2005,2007PresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-

800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgotohttp:

//www.hbsp.harvard.edu.Nopartofthispublication

maybereproduced,storedinaretrievalsystem,usedinaspreadsheet,ortransmittedinanyformorbyanymeans—electronic,mechanical,

photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.

ThisdocumentisauthorizedforuseonlyinORG500-FoundationsofEffectiveManagementbyVariousfrom

December2009toMay2010.

104-071

NewOrleansandDallasphonecompanyprovidersforusingtheirlocalnetworks,andthe

telecommunicationscompanywhoselong-distancenetworkitleasedtoconnectNewOrleansto

Dallas.Theseline-costexpenseswereasignificantcostforalllong-distancecarriers.

LDDSstartedwithabout$650,000incapitalbutsoonaccumulated$1.5millionindebtsinceit

lackedthetechnicalexpertisetohandletheaccountsoflargecompaniesthathadcomplexswitching

systems.ThecompanyturnedtoBernardJ.（Bernie）Ebbers,oneofitsoriginalnineinvestors,torun

things.Ebbershadpreviouslybeenemployedasamilkman,bartender,barbouncer,carsalesman,

truckdriver,garmentfactoryforeman,highschoolbasketballcoach,andhotelier.Whilehelacked

technologyexperience,Ebberslaterjokedthathismostusefulqualificationwasbeing“themeanest

SOBtheycouldfind.”4Ebberstooklessthanayeartomakethecompanyprofitable.

Ebbersfocusedtheyoungfirmoninternalgrowth,acquiringsmalllong-distancecompanieswith

limitedgeographicserviceareasandconsolidatingthird-tierlong-distancecarrierswithlarger

marketshares.Thisstrategydeliveredeconomiesofscalethatwerecriticalinthecrowdedlong-

distanceresellingmarket.“Becausethevolumeofbandwidthdeterminedthecosts,moremoney

couldbemadebyacquiringlargerpipes,whichloweredperunitcosts,”oneobserverremarked.5

LDDSgrewrapidlythroughacquisitionsacrosstheAmericanSouthandWestandexpanded

internationallythroughacquisitionsinEuropeandLatinAmerica.（SeeExhibit1foraselectionof

mergersbetween1991and2002.）In1989,LDDSbecameapubliccompanythroughamergerwith

AdvantageCompanies,acompanythatwasalreadytradingonNasdaq.Bytheendof1993,LDDS

wasthefourth-largestlong-distancecarrierintheUnitedStates.AfterashareholdervoteinMay

1995,thecompanyofficiallybecameknownasWorldCom.

Thetelecommunicationsindustryevolvedrapidlyinthe1990s.Theindustry’sbasicmarket

expandedbeyondfixed-linetransmissionofvoiceanddatatoincludethetransportofdatapackets

overfiber-opticcablesthatcouldcarryvoice,data,andvideo.TheTelecommunicationsActof1996

permittedlong-distancecarrierstocompeteforlocalservice,transformingtheindustry’scompetitive

landscape.Companiesscrambledtoobtainthecapabilitytoprovidetheircustomersasinglesource

foralltelecommunicationsservices.

In1996,WorldComenteredthelocalservicemarketbypurchasingMFSCommunications

Company,Inc.,for$12.4billion.MFS’ssubsidiary,UUNET,gaveWorldComasubstantial

internationalpresenceandalargeownershipstakeintheworld’sInternetbackbone.In1997,

WorldComuseditshighlyvaluedstocktooutbidBritishTelephoneandGTE（thenthenation’s

second-largestlocalphonecompany）toacquireMCI,thenation’ssecond-largestlong-distance

company.The$42billionpricerepresented,atthetime,thelargesttakeoverinU.S.history.By1998,

WorldComhadbecomeafull-servicetelecommunicationscompany,abletosupplyvirtuallyanysize

businesswithafullcomplementoftelecomservices.WorldCom’sintegratedservicepackagesandits

Internetstrengthsgaveitanadvantageoveritsmajorcompetitors,AT&

TandSprint.Analystshailed

EbbersandScottSullivan,theCFOwhoengineeredtheMCImerger,asindustryleaders.6

In1999,WorldComattemptedtoacquireSprint,buttheU.S.JusticeDepartment,inJuly2000,

refusedtoallowthemergerontermsthatwereacceptabletothetwocompanies.Theterminationof

thismergerwasasignificanteventinWorldCom’shistory.WorldComexecutivesrealizedthatlarge-

scalemergerswerenolongeraviablemeansofexpandingthebusiness.aWorldComemployees

4Jeter,p.27.

5Jeter,p.30.

6CFOMagazineawardedSullivanitsCFOExcellenceawardin1998;

FortunelistedEbbersasoneofits“PeopletoWatch2001.”

2

notedthataftertheturndownoftheSprintmerger,“Ebbersappearedtolackastrategicsenseof

direction,andtheCompanybegandrifting.”b

CorporateCulture

WorldCom’sgrowththroughacquisitionsledtoahodgepodgeofpeopleandcultures.One

accountantrecalled,“Wehadofficesinplacesweneverknewabout.We’dgetcallsfrompeoplewe

didn’tevenknowexisted.”WorldCom’sfinancedepartmentattheMississippicorporate

headquartersmaintainedthecorporategeneralledger,whichconsolidatedinformationfromthe

incompatiblelegacyaccountingsystemsofmorethan60acquiredcompanies.WorldCom’s

headquartersforitsnetworkoperations,whichmanagedoneofthelargestInternetcarrierbusinesses

intheworld,wasbasedinTexas.ThehumanresourcesdepartmentwasinFlorida,andthelegal

departmentinWashington,D.C.

Noneofthecompany’sseniorlawyerswaslocatedinJackson.[Ebbers]didnotincludethe

Company’slawyersinhisinnercircleandappearstohavedealtwiththemonlywhenhefeltit

necessary.Heletthemknowhisdispleasurewiththempersonallywhentheygaveadvice—

howeverjustified—thathedidnotlike.Insum,Ebberscreatedacultureinwhichthelegal

functionwaslessinfluentialandlesswelcomethaninahealthycorporateenvironment.c

Aformermanageradded,“Eachdepartmenthaditsownrulesandmanagementstyle.Nobody

wasonthesamepage.Infact,whenIstartedin1995,therewerenowrittenpolicies