WorldCom grew explosively in the 1990s telecom boom into the second-largest long-distance phone company in America, fueled by an aggressive string of acquisitions and a stock price that kept executives' fortunes tied to constant growth.
When growth slowed, CFO Scott Sullivan and other executives began disguising billions of dollars in routine operating expenses as capital investments, artificially inflating profits by at least $3.8 billion. An internal auditor uncovered the fraud in June 2002, and the company filed for bankruptcy weeks later with $107 billion in assets — at the time the largest bankruptcy filing in U.S. history.
CEO Bernie Ebbers was convicted of fraud and conspiracy and sentenced to 25 years in prison. Roughly 30,000 employees lost their jobs and investors lost tens of billions of dollars. The scandal, alongside Enron's, led directly to the Sarbanes-Oxley Act overhauling U.S. corporate accounting rules.
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