WorldCom

AAA

DEFINITION of 'WorldCom'

Formerly known as WorldCom, now known as MCI, this U.S.-based telecommunications company was at one time the second-largest long distance phone company in the U.S. Today, it is perhaps best known for a massive accounting scandal that led to the company filing for bankruptcy protection in 2002. WorldCom executives effectively fudged the company's accounting numbers, inflating the company's assets by around $12 billion dollars. The swift bankruptcy that followed led to massive losses for investors.

BREAKING DOWN 'WorldCom'

WorldCom's bankruptcy filing in 2002 was the largest such filing in U.S. history. The WorldCom scandal is regarded as one of the worst corporate crimes in history, and several former executives involved in the fraud faced criminal charges for their involvement. Most notably, company founder and former CEO Bernard Ebbers was sentenced to 25 years in prison, and former CFO Scott Sullivan received a five-year jail sentence, which would have been longer had he not pleaded guilty and testified against Ebbers. Under the bankruptcy reorganization agreement, the company paid $750 million to the Securities & Exchange Commission in cash and stock in the new MCI, which was intended to be paid to wronged investors.

RELATED TERMS
  1. Reorganization

    A process designed to revive a financially troubled or bankrupt ...
  2. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  3. Cook The Books

    A buzzword describing fraudulent activities performed by corporations ...
  4. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  5. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  6. Restructuring

    A significant modification made to the debt, operations or structure ...
Related Articles
  1. Personal Finance

    4 History-Making Wall Street Crooks

    Find out how these Wall Street high-rollers landed themselves in hot water.
  2. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  3. Investing

    The Biggest Stock Scams Of All Time

    Where there is money, there are swindlers. Protect yourself by learning how investors have been betrayed in the past.
  4. Retirement

    The Ghouls And Monsters On Wall Street

    Learn about some of the creepiest cases of fraud and the characters behind them.
  5. Options & Futures

    5 Lessons From The World's Biggest Bankruptcies

    We can learn of investing strategies by studying previous financial disasters.
  6. Options & Futures

    Business Owners: Avoid Enron-esque Retirement Plans

    If your business administers a retirement plan, you should recognize what's at stake.
  7. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  8. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  9. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  10. Economics

    Explaining Carrying Cost of Inventory

    The carrying cost of inventory is the cost a business pays for holding goods in stock.
RELATED FAQS
  1. How does lack of corporate social responsibility hurt a company's bottom line?

    The lack of corporate social responsibility at WorldCom led directly to the demise of this multibillion dollar organization. ... Read Full Answer >>
  2. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  3. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  4. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  5. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!