Case Study on the Elements of Crime - Essay Example

ELEMENTS OF CRIME WorldCom's Collapse When Enron, which was one of the top Fortune 500 companies, filed for bankruptcy in December 2nd 2001,the news came as a jolt to many of the investors. When the dubious account activities and scandal in Enron were revealed it came as a shock to the investors. US president George W. Bush had assured them by terming Enron's case as a rotten apple in the healthy corporate system. Despite of president's assurances many high profiled companies collapsed. WorldCom's main business was electronic commerce and Internet and it was ranked as the second largest telecom company in the whole US.

During its 15 existence WorldCom acquired many companies and reached to a commanding position where only a few companies had reached can stand up to the situation. The fast growth in WorldCom was due to the efforts of former WorldCom chief executive officer (CEO) Mr. Bernard Ebbers. Because of his innovative ideas and contributions WorldCom reached to a commanding position. The companies it acquired were UUNET, MCI and CompuServe. WorldCom expanded its business to more than 65 countries very rapidly; due to boom in Internet in 1990's little thought was given to the fundamentals of the company.

When Securities and Exchange Commission (SEC) sought an explanation from WorldCom in March 2002, slowly the scandal came to light. When credit rating agencies like Standard & Poor's, Moody's and Fitch downgrade WorldCom rating to a new low the company announced immediate job cuttings around the world. The CEO of the company Ebbers resigned after when SEC revealed that WorldCom had lent about $340 million to him as loans that he used to buy his own shares. The credit rating agency Standard & Poor's downgraded WorldCom credit rating to below investment grade that brought down company's status to a junk status.

The result was its removal from S&P index and Nasdaq halted the company's trading of stocks of WorldCom Group and MCI Group. SEC filed a suit against WorldCom on charges of securities fraud in the district court of New York. It also charged that the company's profits were used for personal use by the high ranked officers and the company misled the agencies regarding its reported earnings. Further investigation revealed that the reported earning and financial statements of the company had deviated from actual earnings.

It was major blow to the investors as the share prices of the company fell. Most of the investing banking companies had to suffer due to the WorldCom's collapse. In July WorldCom filed for Chapter 11 bankruptcy.ReferenceV. Sridhar. (2002). The WorldCom collapse. Retrieved 29th August 2006, http://www.hinduonnet.com/fline/fl1915/19150810.htm -->.