Worldcom burned growth. Accounting frauds broke his neck

24. May 2025 at 14:02

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At the beginning of the 1980s, the telecommunications market in the US had large players divided, which was also the relatively high prices of their services. State regulators wanted to bring more competition to it and large companies forced them to rent their phone lines.

One of the newcomers he starred in this environment was WorldCom. Built on cheap Telephones and expansion in the form of billions of competitors’ acquisitions.

It reached the peak just before the so -called dotcom bubble at the beginning of the millennium. The company did not help even the unfair practices of managers and eventually went bankrupt. She left billions of debts and disappointed investors. However, its leaders did not avoid the punishment.

We describe the story of the Worldcom’s company in series Podfukáriin which we focus on the most famous financial fraudsters from the world and Slovakia.

Biznisplan from the café

The story of WorldCom begins with a « legend » about a meeting of three friends in a café, where one of them drew a business plans on the sale, based on the sale of cheap phone calls. Specifically, those that were once referred to in the Czech Republic as intercity and USA as long -distance, « Long Distance » and traditional telephone companies were a dairy cow.

Whether the legend of the café is true or not, the fact is that in 1983 Murray Waldron, William Rector and Bernard Ebbers with an initial external capital of $ 650,000 founded Long Distance Discount Services (LDDS). It was renamed World in 1995.

However, this has already had a turbulent decade that her as her boss was transferred by Bernard Ebbers. This native of Edmonton, Canada, gradually worked his way up to the richest Americans. Although he studied physical education at the university, he chose a career in business. He first owned a network of motels and after his forties he embarked on telecommunications.

Ebbers’s business was that they were cheaper than the competition and thus quickly acquired a market share. In addition, the US was experiencing an internet boom in the 1990s, which created a great demand for telecommunications services.

While the LDDS was renamed in 1995 to Worldc, it swallowed more than 60 competitors. And even then the expansive corporate policy, which was mainly Ebbers, continued.

In 1998, WorldCom dared to a big fish. For $ 37 billion, MCI Communications, the second largest landline operator in the US, bought MCI Communications. At the beginning of the third millennium, Worldcom already controlled half of the US internet communication and employed 60,000 people in 65 countries around the world.

At the end of the 1990s, Ebbers appeared in the American Super -Bohemian ranking of the Forbes magazine at 174.

The media nicknamed him « Telecom Cowboy » because he carried jeans and high cowboy boots. He didn’t like a suit and a tie. He also owned several farms, bought the largest with two thousand square kilometers in 1998 in Canada for $ 65 million. He liked to drive a tractor and was a strong faithful Christian.

Cracks in the growth strategy

The acquisition strategy of the Worldcom encountered in 2000, when Ebbers canceled the planned takeover of competing sprint for $ 129 billion. The US authorities indicated that the purchase would lead to the dominant position of his company on the market, which would not allow regulatory regulations.

In addition, at the time of the spilled dotcom bubble, Worldcoma began to stagnate sales, which slowed down the rise in the prices of his shares, or it pulled them down. The rising price of the shares was the cornerstone of the company’s expansion, which makes it easier to earn external capital.

Worldcom managers thus put under the pressure of investors who required continuous growth. They found the solution that they resorted to creative accounting. For example, corporate reserves have begun to be reported as sales or transferred operating costs to the category of long -term capital expenditure, which is not depreciated in one time.