Worldcom Stock Fraud
On June 26, 2002 U.S. regulators charged WorldCom Inc. with fraud after MCI Worldcom admitted it hid almost $4 billion of costs, bringing it to the brink of bankruptcy in one of the biggest accounting scandals ever. The scandal pushed Worldcom stock to an all time low of just 5 cents after being over $16.00 this year and over $60.00 just a few years ago.
Adding fuel to the investigation is the fact that Arthur Anderson was Worldcom's auditor while the inappropriate accounting was taking place. Arthur Anderson has recently been found guilty of Obstruction of Justice charges in the governments investigation of another infamous client, Enron. Worldcom switched auditors from Andersen to KPMG this year at which point the accounting irregularities were discovered.
The SEC said in its civil lawsuit that the scheme was "directed and approved by Worldcom's senior management and allowed WorldCom to fraudulently report 2001 cash flow of $2.393 billion, rather than its actual loss of $662 million, the SEC said. In the first quarter of 2002, WorldCom incorrectly reported cash flow of $240 million, rather than a loss of about $557 million.
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