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WorldCom Scam, 2002

Background ‡ WorldCom was one of the pioneers of the 1990s telecoms boom. ‡ An aggressive acquisition spree saw it grow from a small-time regional operator in the early 1980s to a huge international business. ‡ WorldCom was the darling of Wall Street and the Telecom Industry of the 90 s  rew rapidly through acquisitions and from increased demand for telecom services  High stock price was a powerful currency to make acquisitions .

S. 2nd largest long-distance operator in 1998 and 2002 ‡ Had over 20 million customers in 2002 . WorldCom was deeply involved in acquisitions and completed several mega-deals ‡ Purchased over 60 firms in 2nd half of the 90 s ‡ WorldCom moved into Internet and data traffic ± Handled 50% of US Internet traffic ± Handled 50% of e-mails worldwide ‡ By 2001 owned a third of the US data cables ‡ Was U.Background ‡ During the 1990 s.

Overview Key Events ± 1996: Acquired MFS (including internet backbone) ± 1998: Acquired MCI (more than twice it s size) ± 2000: Failed merger with Sprint (would have been the largest merger in history) ± 2000: Dotcom Bubble Burst (rapid decline in telecom stock values) ± 2000-02: WorldCom loans $400M to CEO (Ebbers) ± 2002: Accounting Fraud uncovered ± 2002: Filed for Bankruptcy Protection ± 2004: Emerged from Bankruptcy as MCI ± 2005: Verizon agrees to acquire the company for $6.75B (plus assumption of $6B of Debt) .

Bernard Ebbers. . he resigned from WorldCom on April 30. 2002. CEO ‡ Borrowed hundreds of million dollars to cover losses on stock which was not repaid and to underwrite the inflated prices he had paid for the company s own shares. ‡ Secured loans from WorldCom to fund personal investments including a $100 million Canada ranch. $658 million in Mississippi timberlands and a $14 million Georgia shipyard ‡ Netted $140 million from stock sales ‡ Facing dismissal.