Evaluating only WorldCom’s profile at its peak — without knowing the outcome — the model ranked Acquisition gone wrong as the #1 likely cause. Documented cause: Fraud.
Key Events Timeline
FOUNDING
Bernie Ebbers co-founded Long Distance Discount Services, later renamed WorldCom, in Mississippi as a telecom reseller.
FUNDING
WorldCom acquired MCI for $37B in 1998, becoming second-largest US long-distance carrier; stock peaked at $64.51 in 1999.
FRAUD EXPOSURE
Internal auditor Cynthia Cooper discovered $3.8B in improperly capitalized expenses; Scott Sullivan fired; SEC launched investigation June 25.
SHUTDOWN
Filed Chapter 11 July 21, 2002 with $107B in assets — largest bankruptcy in US history; 17,000 jobs eliminated; Ebbers sentenced to 25 years in 2005.
Full Analysis
Free · no account needed
Documented cause
WorldCom CEO Bernie Ebbers orchestrated the largest accounting fraud in US history, improperly capitalizing $3.8B in operating expenses to inflate earnings. CFO Scott Sullivan executed the scheme between 1999 and 2002. On June 25, 2002, WorldCom disclosed the fraud; on July 21, 2002 it filed the largest bankruptcy in US history at $107B in assets. Ebbers was convicted in 2005 and sentenced to 25 years in prison. 17,000 employees lost jobs.
Lesson
“Board independence and external audit rigor are the only reliable checks against CEO-driven accounting fraud.”