Executives at telecommunications giant WorldCom perpetrated accounting fraud that led to the largest bankruptcy in history. The fraud was revealed to the public in June 2002 and WorldCom filed for bankruptcy in July 2002.
Evidence shows that the accounting fraud was discovered as early as June 2001, when several former employees gave statements alleging instances of hiding bad debt, understating costs, and backdating contracts. However, WorldCom's board of directors did not investigate these claims. In June 2001, a shareholder lawsuit was filed against WorldCom, but it was thrown out of court due to lack of evidence.
When the Securities and Exchange Commission (SEC) launched its own investigation in March 2002, it was discovered that the prior claims were valid. As a result, the SEC filed a civil fraud lawsuit against WorldCom and federal charges were filed against several executives.
The SEC’s investigation into the accounting fraud at WorldCom turned up several key players. The following is a list of high-ranking WorldCom executives and other employees who are implicated in the accounting fraud:
- Bernard Ebbers – former CEO of WorldCom. Ebbers is suspected in the accounting fraud but no charges have been filed against him.
- Scott Sullivan – former CFO of WorldCom. Sullivan was indicted on charges of securities fraud, conspiracy, and false statements to the SEC.
- David Myers – former controller of WorldCom. Myers is charged with securities fraud, conspiracy, and false statements to the SEC.
- Buford Yates Jr. – former director of general accounting. Yates pled guilty to charges of securities fraud and conspiracy.
- Betty Vinson – former director of management reporting. Vinson pled guilty to charges of conspiracy to commit securities fraud.
- Troy Normand – director of legal entity accounting. Normand pled guilty to securities fraud and conspiracy charges.
WorldCom is currently settling the civil fraud lawsuit with the SEC.