In the year 2000, Worldcom was the second largest U.S. long distance telephone service provider and a leading supplier of Internet infrastructure worldwide. Its stock market value was $150 billion and its Chief Executive Officer (CEO) was on Forbes’ list of the 200 richest men in the country. Its assets exceeded $100 billion, its revenues were over $30 billion, it had 20 million retail customers and its corporate clientele included the U.S. Congress, Department of Defense and the Federal Aviation Administration (FAA).
On July 21, 2002 Worldcom filed the then largest bankruptcy in U.S. corporate history. Three weeks prior, it announced earnings for its previous five quarters had been overstated by $3.8 billion. Its Chief Executive Officer (CEO), Chief Financial Officer (CFO) and three other accounting executives would eventually serve prison time for what is now regarded as one of the largest accounting frauds ever perpetrated.
This case, part of the Professional Risk Managers' International Association (PRMIA) case studies for exam 4, played an integral part in the drafting of the Sarbanes-Oxley legislation which dramatically altered the regulatory environment worldwide. Join us for a roundtable discussion. Copies of background material can be collected in advance from Mathematics 3 (M3) - 2001.