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The collapse of Worldcom was one of the largest corporate failures in history. As will probably be evident as you read the case, an explosive mixture of greed, arrogance and stupidity [GAS!] made what was completely avoidable all but inevitable. As you read the case, consider the following questions for discussion:

1. What are the pressures that lead executives and managers to "cook the books?"
2. What is the boundary between earnings smoothing or earnings management and fraudulent reporting?
3. Why were the actions taken by Worldcom managers not detected earlier? What processes or systems should be in place to prevent or detect quickly the types of actions that occurred at Worldcom?
4. To what extent were the external auditors and/or the board of directors at fault here? Support your answer with appropriate evidence.
5. Was Betty Vinson a victim or a villain? Should criminal fraud charges have been brought against her? How should employees react when ordered by their employers to do something they do not believe in or feel uncomfortable doing?

Written assignment: As you read the case, develop a ONE PAGE bullet point list of symptoms and/or causes of the problems at Worldcom. for our purposes, the distinction between symptoms and causes is not particularly critical. I am more interested in your careful reading of the case and your identification of the [mostly pretty obvious] red flags. I picked out over 50 items, so you should have no trouble developing a lengthy list. Use two columns, the first for the page number and the second for a brief description of the item.

Copyright © 2010 Gerald M. Myers
Last modified: 1/31/2011; 17:24