Worldcom Fraud Investigation

In: Business and Management

Submitted By NishaRadha
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Use the Fraud Triangle and Fraud Scale to critically analyse the actions of Bernie Ebbers and Scott Sullivan during the WorldCom saga/ What does your analysis suggest?

Dennis Greer’s fraud triangle is a key framework in analysing the ‘factors that cause someone to commit occupational fraud’ (ACFE-The Fraud Triangle, Association of Certified Fraud, Examiners Available from:http://www.acfe.com/fraud-triangle.aspx [January 2014]).

The three elements that make up the model are perceived pressure, perceived opportunity and rationalisation.

In reference to the events of WorldCom, which has been labelled to date, ‘one of the biggest accounting scandals in history’ (CNN Money- WorldCom’s Financial Bomb, Available from:http://money.cnn.com/2002/06/25/news/worldcom/. [June 2002]) the initial pressures that were the driving force behind the actions of CEO, Bernie Ebbers and CFO Scott Sullivan are quite vast. Firstly Ebbers, was faced with the managerial strain of financial pressure on management due to the decline in the economic environment and the high expectations of Wall Street. As a result, he was aware that the key to growth was in acquisition and mergers, which required an illusion of a solid investment portfolio and therefore ‘a heavy dependence on the performance of WorldCom shares’ (Forbes- Bernie Ebbers Guilty, Available from: http:// www.forbes.com/2005/03/15/cx_da_0315ebbersguilty).

In addition, Ebbers was fuelled by greed, ‘nearly a billionaire’ who indulged ‘in luxury yacht and ski house’, had become further invested in the company with ‘a personal loan of 341 million dollars’ being handed out to him. Ebbers wanted to ease the above pressures. In order to execute this, Ebbers exercised his power as CEO by ‘pressurising … and intimidating’ (Jennings, Marianne, 2012, Business Ethics: Case studies and Selected Readings pp.23) to recruit…...

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