The WorldCom Scandal: $11 Billion Accounting Fraud

In 2002, WorldCom collapsed in an $11 billion accounting fraud—the largest bankruptcy in U.S. history at the time.

THE FRAUD: CFO Scott Sullivan classified billions in operating expenses as capital expenditures, making losses look like profits.

THE WHISTLEBLOWER: Internal auditor Cynthia Cooper discovered the fraud by working in secret at night. She was named Time Person of the Year 2002.

THE COLLAPSE: Filed for bankruptcy July 21, 2002. $107 billion in assets. 20,000 employees lost jobs.

THE SENTENCES:

• Bernard Ebbers (CEO): 25 years in prison. Died in prison 2020.
• Scott Sullivan (CFO): 5 years (cooperated)

The Sarbanes-Oxley Act, passed in response to both WorldCom and Enron, became the most significant corporate reform since the 1930s.

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