Worldcom. Inc Case Study

Karson Rackers

February 19, 2017

Business Law

Corporation Essay

WorldCom. Inc.

        In 1983 two businessmen Murray Waldron and William Rector made plans to create a long-distance provider called LDDS or Long Distance Discount Service (Chronology of Events). Long Distance Discount Service was the company name before the INCORPORATORS signed the proper paperwork to finally incorporate the company into what is now known as WorldCom Inc. In creating this company the investors made a man named Bernard Ebbers the chief executive officer. The investors or stockholders then had to file WRITTEN CONSENT to name Bernard Ebbers as an officer of the company. That is the only way that Bernard Ebbers would have been able to be placed in the roll of officer in a corporation.

        A short time later in 1995 LDDS bought their first voice and data transmission company called Williams Telecommunications Group Inc. and proceed to change the name to WorldCom Inc. This opened many doors for this up and coming company. Later the merging with two other companies called Resurgens Communications Group Inc. and Metromedia Communications Corp. creating a three-way stock and cash transaction which put WorldCom Inc. as the fourth largest long-distance network in the United States. WorldCom Inc. continues to acquire more company growing ever stronger and larger company becoming the second-largest long-distance company and the largest handler of Internet data ("WorldCom's Collapse: The Overview").

        WorldCom Inc. was a company that just never seemed to stop growing and acquiring other companies becoming one of the largest Communication Company. But in early part of 2002 WorldCom Inc. found itself in a corporate scandal that ended very badly. After all the hearings were done with and charges filled with the SEC WorldCom Inc. filled for the largest bankruptcy Chapter 11 filling in the United States history (CNNMoney). WorldCom Inc. listed more than $107 billion in assets which in does not even come close to comparing to Enron’s filling in December of 2014. This mighty company came falling down from improperly accounting for more than $3.8 billion in expenses over the years ("WorldCom's Collapse: The Overview").  Before they filled they employed over 60,000 people in 65 countries meaning it was a FOREIGN CORPORATION.

        Sources state that WorldCom’s good times started to sour “in late 1999 when businesses slashed spending on telecom services and equipment” (CNNMoney). It is recorded that WorldCom as a company falsely reported expenses as capital investments from 1999 to the first quarter of 2002 (The Guardian). Which lead to all the financial issues that brought them to bankruptcy. The investigation into WorldCom actually started from the Bush administration crackdown on CORPORATE CRIMES. Business continued to get worse when questions started to rise about the executive officer, Bernard Ebbers and his $366 million in personal loans from WorldCom. These personal loans built up over time since his start with the company in 1983. Although Ebbers is credited for bringing together WorldCom and AT&T along with many other extremely profitable companies he is still at blame for the downfall.

        After all if WorldCom issues have come to light they are said to have revised and redo all their fillings and that it will reduce 2000 profits by more than $3.2 billion. Reports show that although they are said to have done this to correct some of their wrongdoings they have not fixed all of their problems and to be warned that the revision will find more problems (The Guardian). As a customer this company many people were worried that because they have had all of these financial issues and wrongdoings that they would fill bankruptcy and close their doors. This is not the case they reassure customers. WorldCom came out with a statement in July of 2002 when all their problems were brought to the public eye saying in short, they will reorganize and gain control of the financial problems “while operate with the highest integrity” to emerge from Chapter 11 as quickly as possible to service their customers (CNNMoney). Being the second-largest telecommunications companies in the United States before this they had such a large customer base they were able to make great strides to keep their loyal customers after these issues surfaced.

        Although the WorldCom Inc. came out of the accounting scandal with lessons learned the executive officer Bernard Ebbers was not so lucky. On April 30, 2002 he resigned because WorldCom Inc. started looking into the slumping share prices and the SEC research into the company’s support of his personal loans (The Washington Post). Tuesday March 12, 2002 Bernard Ebbers, the former chief executive of WorldCom Inc., was found guilty of fraud, conspiracy and filing false documents related to the $11 billion accounting scandal at the telecommunications company (Chronology of Events). The courts proved that Ebbers used WorldCom Inc. to shelter FRAUD through inaccurate accounting reporting and the Justice Department investigated criminally because of WorldCom’s business practices.