General Information

Who is WorldCom?

WorldCom is one of the world's largest telecommunications companies with 20 million consumer customers, thousands of corporate clients and 80,000 employees. MCI is the long distance unit of WorldCom which it acquired in 1998. It also owns UUNet, controlling over 50% of the wires that Internet service providers use as superhighways to carry Internet traffic between cities and across the world.

What are the accusations against WorldCom?

WorldCom improperly booked $3.8 billion as capital expenditures, boosting cash flow and profit over the past 5 quarters, disguising the actual net loss for 2001 and the first quarter of 2002. In reality, WorldCom would have posted a loss instead of the $1.4 billion net income in 2002. The first quarter of 2002 would also post a loss instead of $130 million in net income. It is possible that the accounting irregularities go back to 2000. In simple terms WorldCom did not account for expenses when it incurred them, but hid the expenses by pushing them into the future, giving the appearance of spending less and therefore making more money. This apparent profitability pleased Wall Street analyst and investors who pushed the stock up to a high of $64.50 in June 1999.