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

Background
During the 1990 s, 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.S. 2nd largest long-distance operator in 1998 and 2002 Had over 20 million customers in 2002

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, 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, he resigned from WorldCom on April 30, 2002.