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INDEPTH:

WORLDCOM
The WorldCom
story
1983:
Introduction of person’s
Bernie Ebbers, a
profile.
former basketball
coach from
Edmonton, buys a
long-distance resale
service that he names
Long-Distance
Discount Services
Bernie Ebbers
(LDDS)

1985:
Ebbers becomes chief
Worldcom’s creation….

• Early 1990s:
Ebbers creates WorldCom, combining
LLDS with two smaller companies -
MFS Communications and UUNet.
• 1994:
LLDS becomes one of the top four
long-distance companies in the U.S.
• 1995:
WorldCom is fined $50,000 US and
ordered to repay $70,000 US in
investigative costs for its role in gathering
employee campaign contributions for a
candidate running for the Mississippi
Public Service Commission in
1991.
Company’s journey….
• 1995-2000:
WorldCom buys more than 60
companies, often using its own
soaring share price to help fund the
acquisitions.
Create Big History……..
• 1997:
WorldCom takes over MCI
Communications for $37
billion US - at the time the
largest takeover in American
corporate history.
Famous personality in
Forbes News..
• 1999:
Forbes magazine cites Bernie
Ebbers's fortune at $1.4
billion US.
• 2000:
U.S. communications
regulators veto WorldCom's
$129-billion US offer for Sprint
Corp., which WorldCom had hoped
would add wireless and local phone
assets to the mix.
Big Loss For Company….
• Fall 2000:
WorldCom warns its earnings
will fall short of estimates by
40 per cent, and that 2001
earnings would be even lower.
Ebbers falls into enormous
personal debt as he'd
pledged his WorldCom shares
as collateral for loans.
WorldCom's board loans him
$375 million US to pay off his
• 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


Scott Sullivan, CFO

• Served as CFO, treasurer and


secretary
• Directed staff to make false
accounting entries
• Personally made false and
misleading public statements
regarding finances
• Netted $45 million from stock sales
• 2001:
Ebbers fails to make the Forbes 400
richest Americans list.
Company Tracing in
Bankruptcy
• January 2002:
WorldCom gets hit with
fallout from the bankruptcy
filing of Global Crossing, a
telecom company, and from the
fact that Ebbers might have to sell millions
of his WorldCom shares to repay personal
•loans.
Company could spin off several
business units
• April 29, 2002:
Shares hit all-time low of
$2.35, down more than 95
per cent from their peak of
$64.50 on June 21, 1999.
Ebbers resigns as CEO after the stock
free-fall. He is replaced by John
Sidgmore.
June 14, 2002 -
The Internal audit team contacted
WorldCom’s audit committee
Internal auditor, Cindy Cooper, asked for
documents supporting numerous capital
expenditures.
No supporting documents were found
• June 25, 2002:
WorldCom discloses that it inflated profits
for more than a year by improperly
accounting for more than $3.9 billion US.
This means that it transferred routine expenses to
capital expenditures, making its earnings appear
larger than they actually were. WorldCom
announces that it will lay off 17,000
workers within the week. The board fires CFO
Scott Sullivan, and controller David Myers resigns.
Company’s Adverse Effect
on Stock Market…..
• June 26, 2002:
News of the WorldCom
scandal sends shock waves
through stock markets,
sending benchmark indices to
new post-Sept. 11 lows.
WorldCom share trading halted.
File Case Against
Company……
• July 2002:
WorldCom files for
bankruptcy protection, listing
$41 billion US in debt.
• Aug. 8, 2002:
Auditors find another $3.3
billion US accounting
irregularity. The revelations will
force the company to restate its
earnings for 2000. The company
already has to restate its financial
results for all of 2001 and the first
quarter of 2002.
• March 2004:
Ebbers pleads not guilty to
charges of fraud and conspiracy in
connection with an $11-billion
US fraud at WorldCom.
• May 2004:
Ebbers charged with falsifying
regulatory filings with the U.S.
Securities and Exchange
Commission in 2001 and
2002.
• March 15, 2005:
Ebbers found guilty by a
federal jury of fraud,
conspiracy and filing false
documents with regulators.
He faces up to 85 years in
prison.
Judge sentences 25 years in
jail …..
• July 13, 2005:
A New York judge sentences
Ebbers to 25 years in prison.
She says Ebbers has until Oct. 12 to
report to prison and she would
recommend a low-security federal
prison in Yazoo City, Miss., near his
home. Ebbers' lawyer said he would
appeal the verdict.
• Dec. 24, 2005:
The Economist mentions
Ebbers’s WorldCom woes in
an article subtitled
“America’s most-hated
companies.”
January 2005 - 10 former directors
agreed to pay $54
million to
settle a shareholder class-
action lawsuit

$18 million to be paid by the


directors themselves.
$36 million paid by the liability
insurance
• Jan. 30, 2006:
Judges hearing Ebbers’s appeal
question whether prosecutors
threatened ex-WorldCom executives
with criminal charges to keep them
from testifying as potential defence
witnesses. Ebbers argues that 25
years is too harsh a sentence for a
white-collar crime.
• July 28, 2006:
A three-judge panel for a U.S. Appeal
Court upholds Ebbers’s 25-year
prison sentence, clearing the way for
Ebbers to begin serving time. In a note
to the court, Judge Ralph Winter acknowledges
the 25-year sentence is “longer than the
sentences routinely imposed by many states for
violent crimes, including murder,” but not
unreasonable given the losses to investors.
• Sept. 7, 2006:
In a public ruling, a federal judge
orders Ebbers to report to prison on
Sept. 26.

Sept. 26, 2006:


Ebbers enters a federal prison in
Louisiana to begin serving his 25-
year sentence.

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