Examining a Business Failure
University of Phoenix
LDR/531 – Organizational Leadership
On July 19, 2002 WorldCom the number two long distance provider filed the largest bankruptcy ever in U.S. history with its $41 billion dollar debt load, and more than $107 billion dollars in assets. WorldCom’s profits began to decrease in 1999 when businesses reduced budgets on telecom services and equipment. Bernie Ebbers the former CEO of WorldCom resigned his position with the company when questions were brought up about $366 million dollars in personal loans from WorldCom. Bernie Ebbers entered the telecommunications industry providing long distance services in 1983 with a Jackson, Mississippi company formally known as LDDS. Ebbers grew the organization with a series of business acquisitions and later changed the name of the company from LDDS to WorldCom in 1995. In 1998 he purchased the telecommunications company MCI for $37 billion dollars and at that time was the number 2 long distance provider second to AT&T making WorldCom a telecommunications giant. In the 1990’s WorldCom was highly seen as one of the success stories of the decade due to its financial success, and job opportunities. WorldCom also submitted a bid to purchase Sprint Corp in a $129 billion dollar deal however, the deal was blocked by regulators due to a softening market for telecom services which would weaken the company’s performance.
WorldCom executed some major accounting misrepresentations that fraudulently covered up the financial condition of the organization to a great extent. According to a document entitled "Report of Investigation" dated March 31, 2003 the report described the accounting shenanigans as follows: "... As enormous as the fraud was, it was accomplished in a relatively mundane way: more than $9 billion in false or unsupported accounting entries were made in WorldCom's financial systems in order to achieve desired reported financial results ..." The primary reason behind...