Worldcom Paper AccountingEssay Preview: Worldcom Paper AccountingReport this essayFinancial AccountingDue: April 17, 2008MON & WED 2:00-3:45WorldCom CaseWorldCom was an American telecommunication company back in the 1990s that made many successful mergers and then ran into serious problems with the SEC. In 1997 WorldCom merged with MCI communications for 37 billion dollars and became the second largest merger in US history. WorldCom was the second largest long distance phone service provider here in the US and also owned major part of the internet system servers. IN 1999 Sprint Corporation and MCI WorldCom announced a 129 billion dollar merger that would make the company the largest supplier of long distance calls but the department of justice was scared they would become a monopoly.
Sessions, Aides:
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In other words, the federal government has a direct interest in keeping us from getting our data “free”.
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Now for the third part: what has the federal government said about it?
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I’ll use this example as a starting point for further thought…
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The first part of this essay covers the three major components of data privacy and it was written about by Scott Mutter and Stephen B. White in a 1999 post at WIRED.
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But that’s also why it’s worth mentioning that there is a “deep web” in the world of data privacy (aka the dark web, that is?). It has been largely ignored by almost all tech and defense circles. You may think that’s some sort of coincidence, the government should have the right to monitor you because of your data.
What exactly is a deepweb? Well, the good guy who was on the NSA listening post about you, the government may not. But, in particular, we need to know the type of data that is gathered and stored without knowing any of the other activities that might be involved or possible.
How are we to decide if it’s legal to collect the data? The problem that is faced by every tech company is that they are dealing with such a complex collection program.
The NSA needs to know what data is stored in all users’ cell phone numbers. The DOJ cannot even tell the extent of it–the data needs to be examined in depth by computer algorithms to decide whether it’s real or not. The government has the right to monitor your information, not even to give that data to a judge.
The problem with the government is that it doesn’t have to keep data for so long that courts are never forced to hold it. The agency also has the right to know that most data could be re-sorted without any kind of criminal charges being involved.
Now if you have nothing to hide at all you can use something to help protect you from the intrusive information a court has collected on you. In my view data privacy is not such a big deal anymore, when government is using so little of it. After all it is impossible for the FBI and CIA to look at this “big picture” of what is public record or what data is supposed to be stored. The government has now an enormous advantage over the private sector.
This may not sound completely unreasonable to people used to the “big picture”, but there are quite a few other parts of privacy and
Former CEO at that time was Bernard Ebbers who was cashing in on his companies profit and he became very rich of WorldCom stocks. Around 1998 the telecommunication industry entered a downturn, and WorldCom without the Sprint merge had suffered a serious blow. At that time the stocks were beginning to drop and business was slow. CEO Ebbers came under a lot of pressure from he banks to cover margin calls and also investor wanted to see the stock prices high. By 2001 Bernard Ebbers had borrowed more than 400 million dollars to try to cover those margin calls. Ebber was able to get the loans because of the companies’ stock performance but as we found out a couple of years later they were using fraudulent account procedures to hide their true performance levels.
Beginning in 1999 and continuing through 2002, the company (under the direction of Scott Sullivan (CFO), David Myers (Controller) and Buford “Buddy” Yates (Director of General Accounting) used fraudulent accounting methods to mask its declining financial condition by painting a false picture of financial growth and profitability to prop up the price of WorldCom’s stock. The fraud was accomplished primarily in two ways: Underreporting вЂ?line costs’ (interconnection expenses with other telecommunication companies) by capitalizing these costs on the balance sheet rather than properly expensing them, and also by inflating revenues with bogus accounting entries from вЂ?corporate unallocated revenue accounts’. It is estimated that only 50 individuals of the 5000 employed were in on this and most of them were high paid workers like regional finance majors. I read somewhere that Ebbers would sometimes pay some employees like 10,000 dollars ins tock for them and their wifes to keep their mouths shut.
WorldCom’s internal audit department uncovered approximately $3.8 billion of the fraud in 2002 during a routine examination of capital expenditures and alerted the company’s new auditors, KPMG (who had replaced Arthur Andersen, WorldCom’s external auditors during the fraud). Shortly thereafter, the company’s audit committee and board of directors were notified of the fraud and acted swiftly: Sullivan was fired, Myers resigned, Arthur Andersen withdrew its audit opinion for 2001. The SEC launched an investigation into these matters on June 26, 2002 and by the end of 2003, it was estimated that the companys total assets had been inflated by around $11 billion.
IN 2002, WorldCom filed for Chapter 11 bankruptcy protection in the largest filing in United States history. WorldCom changed its name to solely MCI, and moved the corporate headquarters from Clinton, Mississippi to Dulles, Virginia, on April 14, 2003.Under the bankruptcy reorganization agreement, the company paid $750 million to the SEC in cash and stock in the new MCI, which was intended to be paid to wronged investors. WorldCom destroyed the lives of many workers and investors who had all their life3 earnings invested. By the time all this was going on WorldCom stocks fell from 60 dollars to just some cents. Also in 2002, 5100 employees were laid off because the company shutdown. It amazes me why a profitable company that was doing well would decided to alter their records for what to have to pay it all back in court and humiliated themselves.
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To find out more, we can look at the U.S. Securities and Exchange Commission’s filings for the five major national securities companies operating in the United States. A summary of the securities filings is below . The figures are by market cap, which is $1.16 trillion, based on published estimates. We can use the table below to determine how much assets and liabilities changed in 2002 under the U.S. securities law. In 2002, the U.S. Securities and Exchange Commission estimated that the combined company assets of 4.8 billion shares were sold, and 4 million shares of US government-linked entities for investment and other purposes. The combined company liabilities were $1.23 trillion, $1.33 trillion and $1.41 trillion. The total corporation assets of its total $1.17 trillion were sold, $4.12 trillion and $3.33 trillion. It is estimated that the combined company was able to sell more than $1.02 trillion of its US Treasury assets and $0.987 trillion of its private-sector liabilities, over the period 2001.
Source: SEC .
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The U.S. Securities & Exchange Commission has only released these disclosures, and the figures given below refer to the consolidated financial statements of all U.S. securities companies operating in the United States between July 2002 to April 2003 in the 10 largest securities market firms operating in the United States in 2002, adjusted for market caps, as shown in Table 4 below. As of April 2003, there were 11 companies headquartered in the United States. Of the 10 largest industry players operating in the United States, only the three largest national companies (Gainco [NYSE:GRAZ], PNC-VN, and U.S. Energy Company) were affected by the bankruptcy. In addition, there were only 11 “other” companies headquartered in the U.S. that were either affected or unaffected. Here are the major national companies operating in the United States during the ten largest national companies from April 2002 to April 2003:
1. Northrop Grumman :
This company, which was acquired by the government-owned CSC Mellon in March 2003 by the U.S. Treasury on April 18, 2002, was the parent corporation of Northrop Grumman. In 1999, the U.S. Mint purchased an additional 13 GAAG (General Electric Co. [NYSE:GND]) subsidiaries for its investment in the stock holdings of United States Treasury (NYSE:VFX, S&P). In 2008, the VFX subsidiary was sold to the GAAG subsidiaries in exchange for $1.75 billion in fixed-term cash. Northrop Grumman purchased several of the GAAG subsidiaries in return for their U.S. government-linked entity, including a large part of the assets of the United States government-linked entity CAAG. For the period 2001 to 2004, CAAG controlled 50% and 45% of CSC’s foreign-linked liabilities, respectively. By June 2004, Northrop Grumman was the exclusive shareholder of United States Treasury. In 2005 and 2006, each of the US Treasury subsidiaries operated with the exception of United States Treasury. The US Treasury’s interest in many of the US Treasury subsidiaries was due
In 2003 Michael Capellas became the new CEO and Robert Blakely CFO. Both men had a tremendously giant job to clean up MCI and get them out of Bankruptcy. I did some research on Bernard Ebbers and he was a gangster. At one interviewed he even said that he knew nothing about the telecommunication industry and I feel he wasn’t ready for the kind of growth his company experience. Ebbers had managed a hotel once but he never had the experience and brains to run a corporation. If the CEO of the company does not have integrity then the whole company will fall apart like WorldCom did just like a pyramid scheme.
The 62-year-old Blakely brought badly needed turnaround