Welcome back to the Deep Dive. Today we're going
to tell a story that it really fits right into
that truth is stranger than fiction category.
It really does. I mean, it's a story that has
everything. Yeah. A humble beginning in a coffee
shop, a just a meteoric rise that defied gravity,
cowboys in boardrooms. And a secret detective
operation. Can't forget that. Happening in the
middle of the night. It is the quintessential
American business tragedy. It's got hubris, greed,
and just a staggering amount of money vanishing
into thin air. We are talking about the rise
and fall of WorldCom. Right. And for some of
our listeners, that name might just be a vague
memory. You know, a logo from the late 90s. A
telecommunications company, something like that.
Exactly. But for anyone who is working in finance
or tech or... Frankly, anyone with a 401k in
the early 2000s, the name WorldCom is probably,
well, it's synonymous with disaster. It was the
Enron of the telecom world. Actually, you know,
in terms of sheer assets, it was bigger than
Enron. Bigger than Enron. Yeah. We're talking
about an $11 billion accounting scandal that
wiped out billions in shareholder value and cost
what? tens of thousands of people their jobs
and what makes the story so fascinating to me
isn't just the fraud itself though we are definitely
going to get into the nitty -gritty of how they
cooked the book oh we have to but it's the sheer
aggression of how this company was built it wasn't
a tech innovator in a garage inventing the next
big thing it was it was a financial machine designed
to swallow everything in its path that is the
perfect way to frame it it's a story about the
pac -man strategy of business growth and what
happens when pac -man runs out of dots to eat.
So our mission today is to unpack this beast.
We're going to look at the origins in Hattiesburg,
Mississippi, trace this explosion of growth through
the 90s, dissect the mechanics of the largest
accounting fraud in history at the time. And
finally, look at the brave whistleblowers who
brought the whole thing crashing down. We've
got a massive stack of sources here, court documents,
historical analyses, SEC filings. And what we
really want to do is move past the headlines
and understand the mechanics. I mean, why did
they do it? How do they think they would get
away with it? And why did the watchdogs, the
auditors, the board, why did they fail so miserably?
Let's get into it. And to do that, we have to
travel back in time, not to Wall Street, not
to Silicon Valley. We are going to Hattiesburg,
Mississippi. The year is 1983. It's a very different
world. I mean, no smartphones, no internet as
we know it. And the telecommunications industry
was, well, it was boring. Utility. Right. You
had Matt Bell, AT &T, and that was pretty much
it. But 1983 is pivotal because the monopoly
is breaking up. The government is taking a sledgehammer
to the Bell system. Right. And this is the context
you need. The breakup of AT &T created a vacuum.
Suddenly, you didn't have to be AT &T to sell
long -distance service. There was this new market
opening up for what they called resellers. So
you could just lease phone lines from the big
guys and then resell the time. Essentially, yeah.
Lease the lines in bulk and then resell the minutes
to businesses at a discount. It's classic arbitrage.
Buy wholesale, sell retail. Exactly. And that
is what brings us to a coffee shop in Hattiesburg.
There are four guys sitting there. One of them
is named Bernie Eppers. Now, Ebers isn't a telecom
engineer. He's not a finance wizard. He's fine.
What was he? A gym teacher turned motel owner?
He was a basketball coach. Yeah. A bouncer at
one point. He owned a chain of motels. He was
a salesman. He had that larger than life, you
know, back slapping, let's make a deal kind of
personality. So not the guy crunching the numbers.
Definitely not. He was the guy selling the dream.
So these investors, they form a company called
Long Distance Discount Services, Inc., or LDDS.
Very, very literal name. Very literal. And initially
it was a total disaster. They were losing money
hand over fist. They were about to go under.
Completely. And in 1985, the other investors,
they turn to Ebers and they say, Bernie, you
take over. You're the CEO. And this is the moment.
This is where the rocket ignition starts. Because
Ebers realizes something fundamental. He realizes
that in this new fractured telecom market. Organic
growth, you know, winning one customer at a time
is for suckers. It's just too slow. Exactly.
If you want to get big, you don't build, you
buy. And this brings us to the core strategy
that defined the company for the next, what,
15 years. The Pac -Man strategy. I love that
analogy because it's so visual. You're just moving
through the maze, eating everything in front
of you. That is literally what they did. They
started acquiring other small, long -distance
resellers. And the model was simple. How did
it work? They'd buy a company, strip out all
the duplicate costs, HR, call it Hing, some of
the network operations, and suddenly the combined
company looks more profitable than the two separate
companies did. Ah, so it creates a feedback loop,
doesn't it? Because if you look more profitable
and you're growing fast, your stock price goes
up. And that stock price becomes your currency.
This is a crucial concept for you to grasp. Uh
-huh. Worldcommer or... well, LEDs at this point,
wasn't usually buying these companies with cash
from a bank account. They were using their own
stock. They were buying them with their own stock.
I'll give you 100 shares of my company for your
entire company. So as long as your stock keeps
going up, you have expensive currency. You can
just buy bigger and bigger targets. It's like
printing your own money, provided Wall Street
believes the story you're telling. And they believed
it. And they bought a lot. The sources say over
60 acquisitions during their arrives. 60? I mean,
just think about that. That is a chaotic amount
of merging. It's a logistical nightmare. Imagine
trying to merge the IT systems, the billing systems,
the corporate cultures of 60 different companies
in just over a decade. I can barely get my laptop
to sync with my phone sometimes. Right. I can't
imagine merging 60 different corporate databases.
And here's the thing. They often didn't. And
that's a bit of foreshadowing for the disaster
to come. They would just slap the new company
on top of the old one and keep moving. No time
to integrate. No time. They had to find the next
dot to eat. Okay, let's fast forward a bit to
1992. This is where they graduate from being
a small regional player to, wait a minute, who
are these guys? Right, because they make a bid
for a company called Advanced Telecommunications
Corporation. And this was a big deal. A $720
million deal. But the price tag isn't the real
headline. The headline is who they outbid. AT
&T and Sprint. The giants. AT &T and Sprint.
That must have been a shock to the system. AT
&T is the establishment. They are the empire.
And here comes this motel owner from Mississippi
throwing more money on the table than they are.
It signaled the changing of the guard. It showed
that Wall Street was rewarding this aggressive
growth at all costs model over the conservative,
you know, steady utility model of AT &T. Ebers
was the darling. He was the darling. He was delivering
double digit returns quarter after quarter. And
clearly the ambition was scaling up. So in 1995,
they changed the name. LDDS is gone. Now they're
WorldCom. It sounds global. It sounds dominant.
It's a statement of intent. They moved the headquarters
to Clinton, Mississippi. But they were thinking
about the entire planet. And speaking of the
planet, or at least the digital one, we have
to talk about the MFS acquisition in 1996. Because
up until now, they're selling phone calls. Long
distance. Right. But the world is changing. People
are starting to buy modems. The internet is happening.
This is one of the smartest moves Ebers ever
made, or maybe just stumbled into. He buys a
company called MFS Communications. Now, MFS was
important because they had their own local fiber
networks in big cities. They could bypass the
local phone companies. But MFS had just bought
another company. U -Net. I remember seeing that
name on old system diagrams. U -Net was arguably
the most important company you've probably never
heard of. In the mid -90s, they carried a huge
percentage of the world's Internet traffic. They
were the backbone. So by buying MFS, WorldCom
accidentally bought the Internet. Essentially,
yes. I mean, it's a bit of an overstatement.
But they went from being a long -distance phone
company to being the landlord of the Internet
just as the dot -com boom was about to explode.
And the stock market must have gone crazy for
that. They went wild. WorldCom became a tech
stock. It wasn't just about phone minutes anymore.
It was about the future of data. And that gave
Ebers the most expensive currency he'd ever had.
His stock was sky high. Which sets the stage
for the big one. Section two of our outline,
the mega mergers. It's 1997. WorldCom announces
they are merging with MCI Communications. This
is the moment everyone just stopped breathing.
Thirty seven billion dollars. Billion with a
B. It was the largest corporate merger in U .S.
history at the time. Let's pause and just contextualize
this for a second. MCI was the original David
to AT &T's Goliath. They were. They were the
ones who fought the legal battles to break up
the monopoly in the first place. They were a
massive established brand. And WorldCom, the
coffee shop company from Mississippi, is buying
them. It was unthinkable to a lot of people.
I mean, MCI had a very specific culture, very
Washington, D .C., very tech savvy, a bit elitist
maybe. And here comes the Mississippi Mafia,
as they were sometimes called. Yeah, Ebbers and
his crew were seen as cowboys. I mean, they wore
cowboy boots to board meetings. They were aggressive
cost cutters. They didn't really care about the
technology. They cared about the stock price.
I can just imagine the culture clash. You've
got the MCI engineers who want to build these
beautiful, elegant networks. And then you've
got the WorldCom accountants coming in and asking.
Why are we spending so much money on coffee filters?
That's not even an exaggeration, is it? Not at
all. Ebers was famous for auditing the coffee
filters in the water coolers. He was obsessed
with cutting costs to boost the bottom line.
So when they took over MCI, the culture shock
was violent. But the deal went through. It went
through in September 1998 after they appeased
the Department of Justice by selling off some
internet assets. They became MCI WorldCom. They
are now a colossus. But the Pac -Man strategy
requires constant feeding. You can't just stop.
You really can. Because the underlying business
selling long distance phone calls was starting
to get really competitive. Prices were dropping.
So the only way to show that big revenue growth
Wall Street expects is to buy another revenue
stream. Exactly. Which is why they do this really
weird deal in 1998 with CompuServe, H &R Block
and AOL. The CompuServe AOL shuffle. I've always
found this one confusing. Can you break this
down for us? Okay, think of it like a real estate
deal. WorldCom buys an apartment building that's
CompuServe. Now, CompuServe has two things. It
has the tenants, which are the people dialing
in to check their email. Okay. And it has the
plumbing and the wiring, which is the network
itself. Right. So WorldCom looks at this and
says, you know what? We hate tenants. Tents complain.
They need customer service. We just want to own
the plumbing. They just want the infrastructure.
So they call up AOL. Now, AOL loves tenants.
AOL is all about the consumer. Of course, they're
sending out a billion of those CDs to get people
to sign up. Exactly. So WorldCom says, hey, AOL,
we will give you all these CompuServe customers,
the tenants. In exchange, you give us your plumbing,
your network division, which was called AAM.
So WorldCom basically creates a monopoly on the
infrastructure and lets AOL deal with the actual
human beings. Precisely. It was a brilliant strategic
move to corner the market on data transport.
They wanted to be the toll booth operator for
the information superhighway. So every time you
send an email or loaded a web page... You wanted
a fraction of a cent. It sounds like a perfect
plan, but then... Hubris kicks in, 1999. They
decide to go for the kill shot. They announce
a merger with Sprint. For $129 billion. That
number. I mean, the MCI deal was $37 billion,
and that was a record. This is nearly four times
that size. It was pure madness. If this deal
had gone through, WorldCom and Sprint combined
would have been larger than AT &T. It would have
created a duopoly in the United States. You would
have had two choices for your phone service,
and that's it. And the regulators finally woke
up. They woke up. Big time. The U .S. Department
of Justice and the European Union both stepped
in. They looked at the map and said, absolutely
not. You cannot own this much of the infrastructure.
It's anti -competitive. So in July 2000, the
deal is blocked. The merger is terminated. And
this. This is the moment the music stops. Why
was this specific failure the turning point?
Why couldn't they just go back to running the
massive business they already had? Because the
business they had was sick. Remember, they had
been masking slowing growth by buying new revenue
streams. Without Sprint, there was no new revenue
to paste onto the books. So suddenly they had
to report their actual organic growth. And the
actual growth wasn't there. Not only was it not
there, it was shrinking. The dotcom bubble was
bursting. All those tech startups that were paying
WorldCom millions for Internet access, they were
going bankrupt. The demand for fiber optic capacity
just plummeted. So you have this massive company
built on the promise of, what, 15, 20 percent
growth every year. Suddenly looking at flat or
even declining revenue. And for a stock like
WorldCom, that is a death sentence. It is. The
stock price is based on the expectation of future
growth. If that expectation vanishes. the stock
crashes. And if the stock crashes, Bernie Ebers
has a very, very big personal problem. Which
brings us to section three, the pressure cooker.
And we really need to talk about Bernie's personal
finances because it explains the desperation
that came next. So Bernie was a wealthy man,
a billionaire on paper, but he didn't just sit
on his stock, did he? No. Bernie lived large.
He bought a massive ranch in British Columbia,
the largest working ranch in Canada. He bought
Timberlands in Mississippi. He bought a yacht
building company. I mean, the list goes on. And
how did he pay for all this? He borrowed against
his WorldCom stock. He took out margin loans.
Exactly. He went to banks, used his millions
of WorldCom shares as collateral, which is great
when the stock is going up. But when the stock
starts to drop. The bank calls. The dreaded margin
call. The bank says. Bernie, your collateral
is worth less now. We need you to either pay
back some of the loan in cash or give us more
collateral. But Bernie didn't have cash. He had
ranches and yachts in Timberland. Right. So to
pay the bank, he would have to sell his WorldCom
stock. And here is the death spiral. If the CEO
of WorldCom starts dumping millions of shares
of his own company, what does the market think?
Total panic. They think the captain is abandoning
the ship. everyone else sells, the price crashes
further. Which triggers more margin calls for
Bernie. Which forces him to sell more stock.
It's a feedback loop that ends with the stock
price at zero. So Bernie goes to the board of
directors. He says, guys, I'm in trouble. And
if I'm in trouble, the company's in trouble.
And the board. The board made a decision that
is still studied in business ethics classes as
just a catastrophic failure of governance. Instead
of letting him fail or forcing him to resign.
Then authorize loans from the company to Bernie.
They lent him shareholder money to pay his personal
debts. Over $400 million. That is obscene. Half
a billion dollars of shareholder money just to
stop the CEO from selling his own stock. Their
logic, if you can even call it that, was that
they were protecting the stock price for everyone.
They thought saving Bernie was saving the company.
But in reality, they were just lighting money
on fire. But even half a billion dollars couldn't
stop the bleeding. The stock kept dropping. The
whole telecom industry was in a free fall. And
by April 2002, the board finally had enough.
The optics were terrible. The stock was in the
toilet. They forced Bernie Ebers to resign. But
the damage was done. And those loans, they weren't
the only secret buried in the company's files.
Not by a long shot. Which brings us to the main
event, the fraud. The how. We know the why. They
had to keep the stock price up to prevent the
margin calls and just to keep the whole Pac -Man
game going. But the how is where it gets technical
and, frankly, just brazen. I mean, they weren't
just nudging numbers. They were rewriting reality.
Okay, so we need to explain two concepts here
for the listener. The first is EBITDA. EBITDA.
Earnings Before Interest, Taxes, Depreciation,
and Amortization. It's a mouthful. It is. But
essentially, it's a measure of a company's operating
health. It asks a simple question. is the core
business making money before we worry about the
accountants and the tax man. And Wall Street
loved EBITDA in the 90s. It was the golden metric.
So WorldCom needed their EBITDA to look good.
It had to look good. Now, WorldCom had a massive
expense called line costs. And what are line
costs? So WorldCom owned a lot of networks, but
not all of them. To complete a call from, say,
New York to London, they might have to pay...
Verizon or British Telecom to use their wires
for the last few miles. So these are fees they
paid to other phone companies. Exactly. And for
a telecom company, that's just the cost of doing
business. It's like a bakery buying flour. It's
an operating expense. It is. So if you sell a
call for a dollar and you pay 40 cents in line
costs, your profit... and therefore your EBITDA
is $0 .60, that $0 .40 disappears from your earnings
immediately. Makes sense. But Scott Sullivan,
the CFO and his team, they realized that these
line costs were eating up all their profit. Their
EBITDA was plummeting because revenue was down,
but they still had to pay these fixed costs to
other carriers. So what did they do? They decided
to take those line costs, billions of dollars
of them, and move them from the expense column
to the capital expenditure column on the books.
CapEx. Which is usually for buying assets. You
know, if I buy a building for a million dollars,
I don't record a million dollar loss today. I
record an asset on my balance sheet and then
I depreciate it over, say, 30 years. So you only
record a tiny slice of that cost this year. Exactly.
So WorldCom took these daily bills, the flour
for the bakery, and pretended they were buying
new ovens. Wow. Instead of subtracting $4 billion
from their earnings in a year, they subtracted
just a tiny fraction of that. So the money still
left the bank account. They still paid the bills
to Verizon and AT &T. Oh, yeah. The cash was
gone. But on the report they showed to Wall Street,
the profit looked massive because the costs had
magically turned into assets. Precisely. They
were capitalizing operating expenses. It inflated
their EBITDA by billions of dollars and made
a company that was losing money look like a cash
machine. It's like me paying my electric bill
but writing it down in my checkbook as a home
improvement investment so I feel richer. That
is a perfect analogy. That is exactly what it
is. And they did it quarter after quarter after
quarter. And that wasn't the only trick, was
it? There was also this phantom revenue. This
one is even dumber, to be honest. It's an accounting
entry they called corporate unallocated revenue.
Unallocated. That sounds suspicious right off
the bat. It basically meant that if a regional
office was short on its revenue target, corporate
headquarters would just find some revenue and
plug it into their numbers. They would just invent
it. They would just make a journal entry. They'd
just type it in. Revenue plus $100 million. With
no customer, no invoice, no cash actually coming
in. Nothing. Just a number in a spreadsheet to
bridge the gap between reality and what Wall
Street expected to see. The scale of this is
just mind -boggling. We aren't talking about
fudging a few thousand dollars here and there.
In the end, the fraud totaled approximately $11
billion. $11 billion of fake assets and fake
revenue. It was a house of cards held together
by Scott Sullivan's ability to bully the accountants
into making these entries. And this brings us
to the heroes of the story. Because usually in
these massive frauds, the people inside are either
complicit or they're too terrified to speak up.
But there was a team in internal audit who decided
they weren't going to play along. Venter Cynthia
Cooper. The night detective. So who was Cynthia
Cooper? She was the vice president of internal
audit. Now, typically, internal audit is there
to check if people are following procedure. You
know, are the travel expenses signed off correctly?
Is the inventory counted right? They aren't usually
hunting for the CFO's secret crimes. Not at all.
But she started noticing things. It started with
a tip. Actually, a mid -level employee mentioned
something about prepaid capacity being moved
around in the books. It just didn't make sense.
And when she asked the finance guys about it.
They got weird. Hostile. Evasive. Scott Sullivan,
the CFO, essentially told her to stay out of
it. He said, this is complicated. Don't worry
about it. Focus on your operational audits. Which,
to a good auditor, is basically a giant flashing
neon sign that says, look here. There is a dead
body in this closet. Exactly. If he had just
explained it calmly, she might have actually
missed it. But his aggression triggered her instincts.
So she decides to dig, but she has to do it carefully.
She can't just run a report in the middle of
the day where everyone can see. And this is the
cinematic part of the story. Her team, specifically,
a guy named Eugene Morse, who was a tech wizard,
they started working at night. Paint the picture
for us. Okay, so it's Clinton, Mississippi. The
WorldCom headquarters is this huge empty building.
It's midnight. They are in a small conference
room or maybe just a cubicle farm. And Morse
is querying the main accounting database. But
the system is old. Very old. The files are massive.
They're literally crashing the servers trying
to pull this data. And they're trying to find
these specific journal entries that are buried
in millions and millions of transactions. And
they are terrified. If the IT department sees
the unusual network traffic. They might report
it to Sullivan. If they get caught, they're fired
instantly. And they're downloading data onto
CD -ROMs. Remember those? Yeah, they're burning
CDs to keep a backup copy off -site just in case
the data accidentally disappears from the servers
overnight. It's so high stakes. They're investigating
their own bosses, the most powerful people in
the company. And then they find it. They find
a journal entry for $500 million. It's moved
from line costs to PPE, property, plant and equipment.
Smoking gun. But there's no invoice attached,
no documentation, no support, just a manual entry
made by the comptroller's office. And then they
find another one and another one. And by June
of 2002, they found billions. Cynthia Cooper
realizes she is sitting on the biggest accounting
fraud in American history. And she knows that
revealing this will destroy the company. It will
kill the stock. It will cost her friends their
jobs. But she doesn't blink. She goes to the
audit committee of the board of directors. She
bypasses Sullivan. She bypasses Ebersole cronies.
She presents the evidence. And the reaction.
Shock. Denial at first. And then just this grim
sense of inevitability. They called Scott Sullivan
in. He tried to explain it away with this complex
story about matching principles and future revenue.
But the board knew you can't capitalize an electric
bill. It's accounting 101. Right. So Sullivan
is fired. And on June 25th, 2002, World Comp
issues a press release. It basically says, oops,
we found a slight error in our accounting to
the tune of $3 .8 billion. The market just imploded.
Trading in the stock was halted. And we have
to mention the other shoe dropping here, Arthur
Anderson. The external auditors, the people who
are paid millions of dollars to verify that WorldCom's
numbers were real and accurate. And they signed
off on all of this. They did. Now, they claim
they were led by Sullivan and his team, which
is true to an extent. But they were also negligent.
They missed some massive red. And the timing
was just fatal for them. This news broke just
days after Anderson was convicted for obstruction
of justice in the Enron case. So Anderson was
already on life support and WorldCom basically
pulled the plug. Effectively, yes. Arthur Anderson
collapsed. The big five accounting firms became
the big four. So section six, the fall. It's
July 2002. The cash is gone. The company's credit
is frozen. There's no way out. On July 21st,
WorldCom files for Chapter 11 bankruptcy. And
the scale of this bankruptcy? It was the largest
in U .S. history at the time, $107 billion in
assets. It dwarfed Enron. It was just a leviathan
going under. And the human cost is what really
gets me. You know, we talk about Bernie Ebers
and his yacht, but what about the people working
in Hattiesburg or the engineers in Tulsa? 17
,000 people lost their jobs. Just let that number
sink in. 17 ,000 families. And many of them had
their 401k retirement savings heavily, heavily
invested. in WorldCom stock. Because the company
encouraged it. Buy the stock. It's going to the
moon. And then it went to pennies. People lost
their entire life savings. They lost their health
care. It was devastating. Meanwhile, the bondholders,
the big banks, they got scraps. About 35 cents
on the dollar eventually. But the shareholders,
the regular people who bought the stock, wiped
out. Total loss. Let's talk about justice. Did
anyone go to jail for this? They did. The prosecutors
from the Southern District in New York didn't
mess around. Scott Sullivan pleaded guilty pretty
quickly and cut a deal. He agreed to testify
against Bernie Evers. And Bernie's defense was
classic Bernie. It was the aw shucks, I'm just
a P .E. coach defense. He claimed he didn't understand
the accounting. He said, I leave the numbers
to Scott. I'm just a visionary. And did the jury
buy it? Not for a second. It's pretty hard to
believe that a CEO who checks the price of coffee
filters doesn't ask any questions when $4 billion
in expenses suddenly disappear from the income
statement. So the jury convicted him? On all
counts. Fraud, conspiracy, filing false documents
with the SEC. And the sentence? 25 years. That
is a life sentence for a man of his age. It was
meant to be a deterrent. It was the era of the
perp walk. The judge effectively said, You broke
the system. You pay the price. Ebers went to
prison in 2006. And he served about 13 years.
13 years, yeah. He got sick, was granted a compassionate
release in late 2019, and died a few months later.
A pretty tragic end to a tragic arc. And the
other executives, Sullivan, David Myers, Buddy
Yates, they all did time, too. Even the mid -level
managers who physically made the fraudulent entries,
like Betty Vinson and Troy Norman, they got probation
or short sentences. That's the part that always
haunts me. Betty Vinson, she was just a mid -level
accountant. She knew it was wrong. She actually
tried to resign. And Sullivan talked her into
staying. He said, just do it this one time to
get us through the quarter. We'll fix it next
quarter. But you never fix it. You never fix
it. It's the slippery slope. You do it once,
you're trapped. Then you have to do it again
just to cover up the first lie. It's a lesson
in why you have to say no the very first time.
So the people are gone, but the company, I mean,
the wires were still in the ground. The fiber
optic cables were still there. You can't just
liquidate the Internet. That's right. The network
was critical national infrastructure. So the
company went through a massive restructuring
and bankruptcy. They shed all the debt. They
fired the trucks and they emerged in 2003. And
they needed a new name. Or rather, an old one.
They went back to MCI. Which makes sense. Worldcom
is a dirty word. MCI still had some brand equity
left. They moved the headquarters from Mississippi
to Virginia. They brought in a new CEO, Michael
Capellas. And there was this famous email from
a new executive that circulated. What did it
say? It said, my company was not founded in a
motel coffee shop. Ouch! Shots fired at Hattiesburg.
It was a total, complete rejection of the Ebbers
legacy. They wanted to be seen as the grown -ups
in the room. They brought in Richard Breeden,
a former SEC chair, to write a report called
Restoring Trust. They implemented the strictest
corporate governance rules on the planet. They
tried to become the Boy Scouts of telecom. They
had to be. They were on probation with the entire
world. Although there was that weird hiccup in
2003 regarding the Iraq War. Yeah, that was strange.
The Department of Defense. gave the new MCI a
$35 million no -bid contract to build a cell
phone network in Baghdad. Which is weird because
MCI wasn't really a wireless company. Right,
and they had just emerged from the biggest fraud
in history. It raised a lot of eyebrows. Critics
were saying, really, there's no one else you
could possibly hire for this. But, you know,
the government needed connectivity fast, and
MCI had the connections. Pun intended. But in
the end, MCI couldn't survive on its own. The
industry was still consolidating. The Pac -Man
game was over for them, but they became a dot
for someone else to eat. In 2006, Verizon stepped
in. The other giant. Verizon bought MCI. They
integrated it into their Verizon business division.
And that was pretty much it. The name MCI faded
away. The name WorldCom was erased. The assets,
the fiber, the UNET backbone, they all became
part of the Verizon network that we use today.
So if you are a Verizon Enterprise customer today,
you might be sending data over cables that Bernie
Ebbers bought back in 1996. Almost certainly.
The physical legacy remains, even if the corporate
entity is long dead. So let's wrap this up. We've
gone from the coffee shop to the $11 billion
lie to the prison cell. When you step back and
look at the whole WorldCom story, what is the
big takeaway for you? For me, it's about the
danger of complex systems that nobody truly understands.
WorldCom became too big to manage. They had 60
disparate accounting systems, no integration,
and a corporate culture that actively discouraged
questions. That chaos provided the cover for
the fraud. It created the shadows where the crime
could happen. Exactly. If they had been a well
-integrated, transparent machine, Scott Sullivan
couldn't have hidden $11 billion. It would have
been impossible. And it's also about the pressure
of what some people call quarterly capitalism.
Absolutely. The need to hit the number. Every
90 days. The market punishes honesty if the truth
is we didn't grow this quarter. WorldCom chose
to lie rather than face the market's wrath. And
finally, it's a testament to the night detective.
Cynthia Cooper. It really is. She proves that
all these systems of control, all the rules and
regulations, they rely on individuals of integrity.
Again, all the rules in the world, but eventually
it comes down to one person sitting in a dark
room deciding to do the right thing. When it
would be so much easier to just go home and forget
about it. That's a powerful thought. It puts
the responsibility on all of us, really. If you
saw the numbers didn't add up, would you be the
one to burn the CD? That's the question. Something
for our listeners to think about next time they're
reviewing an expense report. Thank you for joining
us on this deep dive into the wild world of WorldCom.
Thanks for having me. We'll see you next time.