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PRESENTED BY-
RUPALI
BHARTI
AMOL
NITIN
YOGESH
ROHAN G.
SAMEET
GEET
SWAPNIL
PROFFESOR : Mr Banerjee.
Company Background.
Founded in 1983 by Mr Bernard
Ebbers along with Mr David
Singleton and Mr Murray Waldren.
Company Background.
Started With The About $ 650,000
Initially Called As LDDS (Long Distance
Discount Service)
Went Public In 1989 With The Acquisition Of
“Advantage Companies”
60 Mergers & Acquisition Throughout The Late
80’s And 90’s.
Name Changed From Ldds To Worldcom On
25th May 1995.
Serving More Than 100 Countries.
Company Background.
Elite Client Such As US DEFENCE & STATE
DEPARTMENT.
20 Million Customer World Wide.
In 1998 Acquired MCI (Long Distance Provider
Offering Host Of Telecom Services) For 40 Billion US$
Stock Rose To $64.51 In June 1999.
Employee Strength Of 60,000 In July 2002.
Ebber and sullivan were named as industry leader.
Nemesis Catches up with
Worldcom
Denied the acquisition of another telecom company
( Sprint) in oct 99 by department of justice.
By 2001 market started melting down so did
worldcom stock prices at the wallstreet.
Expected earning fell short by 40%
Jan 2004 came at $0.50 i.e Worthless.
Mr Bernard ebbers resigned as CFO after stock Prices
hit all time low.
Nemesis Catches up with
Worldcom
Showed inflated\fraud profits of 3.9 billion in
the balance sheet
Exchange asked for reworking the financial
statement for 2001-2002 to KPMG- The new
auditors.
In august 2002 another 3 billion was
improperly accounted for.
CFO Mr. Scott Sullivan was fired.
Mr David Myers was asked to step down.
Truth Behind the Scandal.
Truth Behind the Scandal.
Reasons for the fiasco.
1. Corporate Culture.
2. Inorganic Growth.
3. Failing Leadership.
4. Recession in the economy.
Reasons for the fiasco.
5)Vast oversupply of capacity.
6) Unhealthy focus on profits.
7) An unconcerned and malfunctioning
board of directors.
THE FINANCIAL MESS
Debt Of $5.75 Billion.
Signed Aggrement With 26 Banks – Pay
$2.65billion Per Day.
Worldcom Also Had $30 Billion On Board Debt.
How the Stakeholders were
affected?
Decline in the value of stock.
Workforce cut down drastically.
Customers in jeopardy.
Financial Institution Sued Worldcom.
The Indian Connection.
Worldcom and Arthur
Anderson- The Blame
Game.
Worldcom mainly focused on Expansion.
Arthur Anderson – Financial auditor of worldcom had lack of knowledge of
accounting.
Arthur Anderson had a series of audit failures including Enron and Worldcom.
Over aggressive strategies in merging and aquisitions.
Anderson have been criticised for inept
handling of accounting policies, systems and books.
Postcript.
Investigation By ‘SEC’
Biggest Bankruptcy In US Corporate History.
Prison To Guilty
Steps By Breeden To Prevent Fraud In Future
Training Programme
Financial Disclosure.
Review of internal control system.
Restoring Trust
Active Board Commitees.
Auditor Rotation.
Conclusion.
78 Odd Recommendations Were Implemented
In Worldcom Which Were Given By Mr. Richard
Breeden Of Security And Exchange Commision
(SEC).
Initiation Of New Board Of Directors Who Were
More Experienced And Committed.
Changes In Functionality Of Board Members
And Company Policies.
Mr Michael Capellas Former President Of
Hewwlett Packart Was Selected As The Ceo.
Conclusion.
More Shareholders involvement in governance.
CEO & employees asked to sign a pledge of
institutional ethics which showed their
commitment to sound corporate governance &
ethical standards.
Worldcom sold its peripheral business but hold
on to MCI and UUNET( International Internet
Subsidary)
Worldcom was renamed MCI inc after the
Bankruptcy.
Thank You
