World Com: An International Company’s Questionable Ethics

WorldCom was born in 1983 with the name LDDS (Long-Distance Discount Service) in Clinton, Mississippi. In 1985 Early investor Bernard Ebbers becomes chief executive officers (CEO) of LDDS. The company became public in August 1983 with the acquisition of Advantage Companies Inc. In 1993 LDDS acquired long distance providers Resurgens Communications Group and Metromedia Communications in a three-way stock and cash transaction that created the fourth-largest long distance network in the United States. The company was changed to LDDS WorldCom in 1995 and later just WorldCom when LDDS acquired voice and data Transmission Company Williams Telecommunications group in an all-stock deal.

From 1993 to 2000 WorldCom bought or merged the following companies:

• Advanced Communication Corp. (1992)

• Metromedia Communication Corp. (1993)

• Reurgens Communications Group (1993)

• IDB Communications Group, Inc. (1994)

• Williams Technology Group, Inc. (1995)

• MFS Communications Company (1996), which owned local network access facilities via digital fiber optic cable networks in and around U.S. and European cities, and UUNet technologies, an internet access provider for business.

• On November 10, 1997, WorldCom and MCI Communication announced their US$37 billion merger to form MCI WorldCom.

• In 1998 WorldCom complete three mergers: with MCI Communications ($40 billion), the largest in history at that time, Brooks Fiber Properties ($1.2 billion) and CompuServe ($1.3 billion).

• Intermedia Communications (2001), a provider of data and internet services to businesses

On October 5, 1999 Sprint Corporation and WorldCom announced a $129 billion agreement between the two companies. However, the deal did not get approval because U.S. and European regulators blocked the proposed merger on concerns of monopoly creation.

After the MCI acquisition in 1998, the telecommunications industry entered a downturn and WorldCom suffered a serious storm when it was forced to abandon its proposed merger with Sprint.

On March 11, 2002 WorldCom receives a request for information from The U.S. Securities and Exchange Commission relating to accounting procedures and loans to officers.

Bernard Ebbers built WorldCom into the nation's No. 2 long-distance carrier through a string of 60 acquisitions, In April 2002 two months before the accounting scandal, Ebbers resigned amid slumping share prices and SEC probe of his personal loans. Vice Chairman John Sidgmore took over.

WorldCom’s internal auditors uncovered approximately $3.8 billion of the fraud on June 2002. By the end 2003, according to the investigation, SEC estimated that the company’s total assets had been inflated by around $11 billion.

On July 21, 2002, WorldCom filed for chapter 11 bankruptcy protection. WorldCom, now called MCI, emerged from bankruptcy protection on April 20, 2004. On February 14, 2005, Verizon Communications agreed to acquire MCI for $7.6 billion.

On March, 2004, “according to the indictment filed Tuesday, Ebbers and Sullivan made false statements to investors and a false filing with the Securities and Exchange Commission for the third quarter of 2000.

Sullivan pleaded guilty to fraud charges related to the $11 billion accounting scandal that led the telecommunications company into the largest bankruptcy in U.S. history.” (Retrieved from www.cnnmoney.com, on 11/03/07).

Citing M. Scharff “Beyond the accounting fraud, both Ebbers and Sullivan engaged in very questionable dealings with their employees…Sullivan wrote personal checks to seven of his managers giving them $20,000 each…They created conflicting loyalties and disincentives to insist on proper conduct.

Many of the senior executives of WorldCom appear to be guilty of sins by focusing on maintaining some arbitrary financial goal instead of doing what was right. To illustrate, one example of the moral compass occurred when efforts were being made to establish a corporate Code of Conduct. Ebbers reportedly described this efforts as a “colossal