Accounting fraud
...c. 1998- Merger with MFS Communications Co. Includes UUNet, Inc., the internet backbone Feb. 1998- Merger with CompuServe Sept. 1998- Merger with MCI. At the time, the largest merger in history 1999- Forbes list Bernard Ebbers as the 174th richest man in the US. The 376th richest man in the world June 1999- Stock reaches its high- $96.76 Oct. 1999- Agrees to purchase Sprint for $115 billion in stock July 2000- Department of Justice ruled against the Sprint merger Nov. 2000- Cuts revenue projections for 2002. Reveals plans to turn MCI into a tracking stock January 2001- Stock closes below $10 July 2001- President Bush invites Bernard Ebbers to serve on the White House National Security Telecommunications Advisory Committee Feb. 2002- Cuts projections for 2002. Discloses Bernard Ebbers owes the company $408 million in loans March 2002- SEC begins inquiry into accounting practices. April 2002- Bernard Ebbers resigns as CEO of WorldCom. WorldCom cuts 3,700 jobs- 4% of workforce May 2002- MCI tracking sock is removed May 14, 2002- 670 million shares of WorldCom stock are traded- a world record June 2002- CFO Scott Sullivan fired. Company announces 17,000 job cut- 20% of work force June 21, 2002- Wall Street analyst Jack Grubman downgrades WorldCom stock June 24, 2002- Negative report by financial analyst causes WorldCom shares to fall below $1 June 25, 2002- WorldCom discloses accounting fraud. July 13, 2002- 25 banks file lawsuit to request an immediate freeze of $2.65 billion of WorldCom assets July 21, 2002 - WorldCom files the largest bankruptcy in US history Even before the recent accounting disclosures, by 2001, WorldCom was already facing financial difficulties due to large debt and declining rates and revenue. At the same time the growth of telecommunication industry was slowing down, and the company had too much network capacity. The company was deep in debt from buying and merging other businesses. An MCI internal auditor then discovered the accounting fraud during a review of the books. The company then alerted the SEC. WorldCom currently does not have the cash to pay the approximately $5.75 billion in debt that will come due next year. They try to secure $3 billion from the original loan package which is 5 billion dollars. They hope that this loan and the cutting will help to meet the interest payments and delay bankruptcy. When a credit agreement between WorldCom and 26 banks was signed in July 2001, the banks were not aware of WorldCom¡¦s financial situation, which might have led to the prevented the banks not to extend the financing without demanding collateral. The company borrowed 2.65 billion within a year, and needs this money or will have to face bankruptcy. WorldCom attempted to conceal the actual net loss for 2001 and the first quarter of 2002. It incorrectly booked $3.8 billion as capital expenditures, increasing cash flow and profit over the past 5 quarters. It is possible that the accounting fraud go back to 2000. WorldCom hid the expenses and making it seem as it is making more money by spending less. Apparently the investor did not realize and continued to push the stock up to a high of $96.76 in June 1999. At this point, with all the scandals revealed, there is still nobody stepping up to take the blame. WorldCom blames auditor Arthur Andersen for not reporting the irregularities. Andersen claims they did not know about the improper accounting. They say former CFO Scott Sullivan never told the company about the false accounting records. On contrary to CEO Bernard Ebbers¡¦ comment ...