WorldCom

The corporation was originally formed as a result of the merger of WorldCom

(formerly known as LDDS followed by LDDS WorldCom) and MCI
Communications, and used the name MCI WorldCom followed by WorldCom
before taking its final name on April 12, 2003 as part of the corporation's
emergence from bankruptcy. The corporation was purchased by Verizon
Communications with the deal closing on January 6, 2006,and is now identified as
that company's Verizon Business division with the local residential divisions slowly
integrated into local Verizon subsidiaries.

It was instrumental in pushing legal and regulatory changes that led to the breakup
of the AT&T monopoly that dominated American telephony; its purchase by
WorldCom and subsequent bankruptcy in the face of accounting scandals was
symptomatic of the Internet excesses of the late 1990s. It accepted a proposed
purchase by Verizon for US$7.6 billion.

For a time, WorldCom (WCOM) was the United States's second largest long
distance phone company (after AT&T). WorldCom grew largely by aggressively
acquiring other telecommunications companies, most notably MCI
Communications.

History

Long Distance Discount Services, Inc. (LDDS) began in Hattiesburg, Mississippi. in

1983. In 1985 LDDS selected Bernard Ebbers to be its CEO. The company went
public in 1989 through a merger with Advantage Companies Inc. The company
name was changed to LDDS WorldCom in 1995, and later just WorldCom.

The company’s growth under WorldCom was fueled primarily through acquisitions
during the 1990s and reached its apex with the acquisition of MCI in 1998. Among
the companies that were bought or merged with WorldCom were Advanced
Communications Corp. (1992), Metromedia Communication Corp.(1993),
Resurgens Communications Group(1993), IDB Communications Group, Inc (1994),
Williams Technology Group, Inc. (1995), and MFS Communications Company
(1996). The acquisition of MFS included UUNet Technologies, Inc., which had been
acquired by MFS shortly before the merger with WorldCom. In February 1998, a
complex transaction saw WorldCom purchase online pioneer CompuServe from its
parent company H&R Block. WorldCom then retained the CompuServe Network
Services Division, sold its online service to America Online, and received AOL's
network division, ANS. The acquisition of Digex (DIGX) in June 2001 was also
complex; Worldcom acquired Digex's corporate parent, Intermedia
Communications, and then sold all of Intermedia's non-Digex assets to Allegiance
Telecom.

MCI acquisition

On November 10, 1997, WorldCom and MCI Communications announced their

US$37 billion merger to form MCI WorldCom, making it the largest merger in US
history. On September 15, 1998 the new company, MCI WorldCom, opened for
business.

Accounting scandals

The fraud was accomplished primarily in two ways:

1. Underreporting ‘line costs’ (interconnection expenses with other

telecommunication companies) by capitalizing these costs on the balance sheet
rather than properly expensing them.

2. Inflating revenues with bogus accounting entries from "corporate unallocated

revenue accounts".

In 2002, a small team of internal auditors at WorldCom worked together, often at

night and in secret, to investigate and unearth $3.8 billion in fraud. Shortly
thereafter, the company’s audit committee and board of directors were notified of
the fraud and acted swiftly

Bankruptcy

On July 21, 2002, WorldCom filed for Chapter 11 bankruptcy protection in the
largest such filing in United States history at the time (since overtaken by the
collapse of Lehman Brothers and Washington Mutual in September 2008). The
WorldCom bankruptcy proceedings were held before U.S. Federal Bankruptcy
Judge Arthur J. Gonzalez who simultaneously heard the Enron bankruptcy
proceedings which were the second largest bankruptcy case resulting from one of
the largest corporate fraud scandals
Under the bankruptcy reorganization agreement, the company paid $750 million to
the SEC in cash and stock in the new MCI, which was intended to be paid to
wronged investors.