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WorldCom, a Mississippi-based telecommunications company, was founded in 1983 in Clinton, Miss., as Long Distance Discount Services, Inc. (LDDS). Formed to take advantage of the business opportunity to provide long distance phone services following the deregulation of the telephone industry, LDDS grew rapidly through the merger and acquisition of smaller companies and the rapid growth of the industry. In 1995, the company took the name WorldCom, and, by 2000, WorldCom was the 25th largest company in the world. Bernie Ebbers, the company's founder and CEO, was a respected mover and shaker on Wall Street, and its CFO, Scott Sullivan, was voted as one of the country's best CFOs in 1998 by CFO Magazine.
This all abruptly ended in June 2002 when it was disclosed that WorldCom had perpetrated one of the largest accounting frauds in U.S. history. The fraud was initially reported to be $3.8 billion, but further investigation revealed an overstatement of net income by $11 billion. WorldCom was forced to declare bankruptcy.
Most of us have heard the story of the fraud, but we may not be aware of the people who were involved and their struggles with this dilemma. Betty Vinson and Cynthia Cooper may or may not be names that you recognize, but they both made decisions that impacted the WorldCom story.
To read more about WorldCom and the fraud, see Luisa Beltran's July 22, 2002, article, "WorldCom files largest bankruptcy ever," from CNN Money (money.cnn.com).
Betty Vinson
Betty Vinson was the director of management reporting at WorldCom. She had worked there for five years when the fraud was uncovered and received two promotions during that time. Vinson's salary increased from $50,000 when she started to $80,000 in 2002. Vinson reported to Buford Yates, director of general accounting, who re - ported to David Myers, senior vice president and controller, who then reported to CFO Scott Sullivan. (See Figure 1 for an organizational chart.)
A hard worker who often stayed late or brought work home, Vinson considered herself lucky to land the job at WorldCom, as it was located in her hometown of Clinton, Miss. Vinson graduated from Mississippi College in 1978 and married her college sweetheart, Tom Vinson, a printing-equipment salesman who earned $40,000 a year. The couple had one...