Tabag, Frelyn Jade B.

BSA 3

Activity 2: Causes of Corporate Failure

WorldCom

Event summary

 In 1983, the company was established under the name of “Long Distance Discount Service”.
 In 1995, it started to implement a growth strategy by acquiring smaller businesses.

 In the same year, the name of the company was changed to Worldcom.
 It made a merger with MCI Communications Corporation in 1998 and as a result of this merger, it
started to operate on wireless phone services.

 In the early 2000s, it became the second largest telecommunications company in the United States.

 In 2002, an accounting scandal emerged within the company. It has been determined that the
accounting records and financial statements did not reflect the real financial position of the company.

 The size of the aforementioned accounting scandal, which was detected by the internal auditors of the
institution, is that the revenues are shown to be more than approximately USD 11 billion.

 It filed for bankruptcy in July 2002.

 After the bankruptcy announcement, approximately twenty thousand employees of the enterprise
were unemployed.

 Upon the detection of irregularities within the company, the auditors and managers were sentenced
to various penalties.

Causes of Worldcom failure: