Question

1) In the WorldCom scandal do you think Bernie Ebbers knew about the fraud when it was happening? explain your answer

2) If Bernie did know do you think his sentence is fair?

Answer 1

1) In the WorldCom scandal do you think Bernie Ebbers knew about the fraud when it was happening? explain your answer

WorldCom was not just the biggest accounting scandal in the history of the United States. it was also one of the biggest bankruptcies.

WorldCom has become an accounting fraud and a warning to investors. Its CEO, Bernie Ebbers had built the company into one of America’s leading long-distance phone companies by acquiring other telecom companies.

This was not a sophisticated fraud. To hide its falling profitability, WorldCom inflated net income and cash flow by recording expenses as investments. By capitalyzing expenses it exaggerated profit by around $ 3 billion in 2001 and reporting a profit instead of a net loss in Q1 of 2002.

When the tech boom turned to bust, and companies slashed spending on telecom services and equipment, WorldCom resorted to accounting tricks to maintain the appearance of profitability. After Ebbers was forced to step down as CEO in April 2002, it was revealed that he had, in 2000, borrowed $400 million from Bank of America to cover margin, using his WorldCom shares as collateral. As a result, Ebbers lost his fortune.

Bernard Ebbers was sentenced to 25 years in prison, and former CFO Scott Sullivan received a five-year jail sentence after pleading guilty and testifying against Ebbers.

So, I am of opinion that, Bernie Ebbers knew about the fraud when it was happening.

2) If Bernie did know do you think his sentence is fair?

Bernard Ebbers was sentenced to 25 years in prison.

His sentence is fair because, WorldCom was not just the biggest accounting scandal in the history of the United States. it was also one of the biggest bankruptcies.