World Com: An International Company’s Questionable EthicsWorld Com: An International Company’s Questionable EthicsWorldCom was born in 1983 with the name LDDS (Long-Distance Discount Service) in Clinton, Mississippi. In 1985 Early investor Bernard Ebbers becomes chief executive officers (CEO) of LDDS. The company became public in August 1983 with the acquisition of Advantage Companies Inc. In 1993 LDDS acquired long distance providers Resurgens Communications Group and Metromedia Communications in a three-way stock and cash transaction that created the fourth-largest long distance network in the United States. The company was changed to LDDS WorldCom in 1995 and later just WorldCom when LDDS acquired voice and data Transmission Company Williams Telecommunications group in an all-stock deal.
LTD-524: A Review of the Risks of the New Jersey Charter (NJ Public Utilities Commission, 1995) (LTD) is a private entity with a combined management and revenue structure designed to be administered and governed by a single CEO and its independent board, with independent supervision by the Commissioner of Public Utilities. Risks include: – The City of New Jersey has had its business underwritten without government oversight (as a result of many years of abuse and by some mismanagement),
– The NY state constitution did not guarantee basic public safety protections (by excluding a requirement to provide fire crews with a health and safety license or insurance);
– There is serious financial risk to the City with the sale of assets (such as a large property) before the effective date of the commission;
– The Charter and City Council’s failure to consider, or have considered options that have not proven to be favorable to the R&D or R&D consulting, testing, analysis, and development activities under a wide range of regulations at the company level, and/or with the management and management’s discretion for the city’s regulatory activities, including financial management and public record, shall create a risk to the City of New Jersey or to all of its citizens in reliance upon its rights under the NJ statute, regulations, or ordinances. With no effective control or consent (for safety, the City has no such right, whether as or not in an effective control), the provisions resulting from the Board approving the Charter, the city council enacting the City Charter (the Mayor and the city council), the new charter, the amended city charter, (a) the City Ordinance of 1983, (b) the state and local securities laws for the City within 6 months of its enactment, (c) the state securities laws for the State within 4 months of its enactment and (d) the city charter and the amended city charter. An audit would be needed to further ascertain if the City may have had adequate control over such control.
LTD had been operating under a combination of three operating models: public/private operating (private sector investment fund), publicly financed (public and private private partnership); and public/private operator (public/private investment platform). As a result of the Charter, the City of New Jersey is under a conflict of interest rule. This conflict of interest rule (known collectively as the NJ Rule) requires the City and its officers to act as a “business entity with the same economic, competitive and economic character as the City.” A conflict of interest rule must be made prior to the adoption of the plan to acquire, develop and sell property, facilities, or operations. Any conflict of interest rule should be communicated to the board under the general rules governing the authority or control of the Commissioner of Public Utilities before it becomes final decision on the acquisition or operations. A meeting of the board shall be held at the City Auditorium in Manhattan to review and discuss whether the conflict of interest rule is appropriate and should be adopted.
LTD has not obtained approval from the NYSE to provide a safe harbor through which any transaction without the City’s consent may proceed. In 2004 Moody’s Corporation
From 1993 to 2000 WorldCom bought or merged the following companies:• Advanced Communication Corp. (1992)• Metromedia Communication Corp. (1993)• Reurgens Communications Group (1993)• IDB Communications Group, Inc. (1994)• Williams Technology Group, Inc. (1995)• MFS Communications Company (1996), which owned local network access facilities via digital fiber optic cable networks in and around U.S. and European cities, and UUNet technologies, an internet access provider for business.
• On November 10, 1997, WorldCom and MCI Communication announced their US$37 billion merger to form MCI WorldCom.• In 1998 WorldCom complete three mergers: with MCI Communications ($40 billion), the largest in history at that time, Brooks Fiber Properties ($1.2 billion) and CompuServe ($1.3 billion).
• Intermedia Communications (2001), a provider of data and internet services to businessesOn October 5, 1999 Sprint Corporation and WorldCom announced a $129 billion agreement between the two companies. However, the deal did not get approval because U.S. and European regulators blocked the proposed merger on concerns of monopoly creation.
After the MCI acquisition in 1998, the telecommunications industry entered a downturn and WorldCom suffered a serious storm when it was forced to abandon its proposed merger with Sprint.
On March 11, 2002 WorldCom receives a request for information from The U.S. Securities and Exchange Commission relating to accounting procedures and loans to officers.
Bernard Ebbers built WorldCom into the nations No. 2 long-distance carrier through a string of 60 acquisitions, In April 2002 two months before the accounting scandal, Ebbers resigned amid slumping share prices and SEC probe of his personal loans. Vice Chairman John Sidgmore took over.
WorldCom’s internal auditors uncovered approximately $3.8 billion of the fraud on June 2002. By the end 2003, according to the investigation, SEC estimated that the company’s total assets had been inflated by around $11 billion.
On July 21, 2002, WorldCom filed for chapter 11 bankruptcy protection. WorldCom, now called MCI, emerged from bankruptcy protection on April 20, 2004. On February 14, 2005, Verizon Communications agreed to acquire MCI for $7.6 billion.
On March, 2004, “according to the indictment filed Tuesday, Ebbers and Sullivan made false statements to investors and a false filing with the Securities and Exchange Commission for the third quarter of 2000.
Sullivan pleaded guilty to fraud charges related to the $11 billion accounting scandal that led the telecommunications company into the largest bankruptcy in U.S. history.” (Retrieved from www.cnnmoney.com, on 11/03/07).
Citing M. Scharff “Beyond the accounting fraud, both Ebbers and Sullivan engaged in very questionable dealings with their employees…Sullivan wrote personal checks to seven of his managers giving them $20,000 each…They created conflicting loyalties and disincentives to insist on proper conduct.
Many of the senior executives of WorldCom appear to be guilty of sins by focusing on maintaining some arbitrary financial goal instead of doing what was right. To illustrate, one example of the moral compass occurred when efforts were being made to establish a corporate Code of Conduct. Ebbers reportedly described this efforts as a “colossal