Worldcom

1983- Businessmen Murray Waldron and William Rector plan to create a discount long-distance provider
called LDDS (Long Distance Discount Service). Early investor Bernard Ebbers becomes chief executive
officer of LDDS two years later.

1995 - LDDS acquires voice and data transmission company Williams Telecommunications Group Inc.
(WilTel) for $2.5 billion cash and changes its name to WorldCom Inc.

1998 - WorldCom completes three mergers: MCI Communications Corp. ($40 billion) -- the largest in
corporate history at the time -- Brooks Fiber Properties Inc. ($1.2 billion) and CompuServe Corp. ($1.3
billion).

1999 - WorldCom and Sprint Corp. agree to merge. WorldCom shares peak at more than $64.
- U.S. and European regulators block the proposed merger with Sprint; deal is terminated.

1999 to early 2002 - CEO of the company, Bernard Ebbers along with the help of senior management
used fraudulent and illegal accounting methods to mislead and defraud investors and other directors.
The fraudulent accounting method that they used were majorly two in number: ‘The reduction of
reported line costs’ and the ‘exaggeration of reported revenue’ . These methods were used to ignore the
generally accepted accounting principles (GAAP) along with not informing the users of the financial
statements of the changes and alterations made to the previously used accounting practices. This was
done to reduce their E/R ratio, which was used as the performance Indicator of telecommunications
companies.

The CEO in July 2002 filed for Chapter 11 bankruptcy after disclosing about the frauds and illegal
accounting methods used to increase revenue and reduce expenses. By the end of 2003, it was
estimated after the investigation that the company’s total assets had been increased by around $11
billion. As a result of these anomalies, the former CEO, Bernie Ebbers, was sentenced to 25 years in jail.
Interestingly, WorldCom merged with MCI Inc Communications to continue its operations, and in 2006,
another telecommunications giant – Verizon, acquired the company.