Company's Profile:

Telecommunication industry was facing an evolution from 1990 till 2002. In 1983 started as a small long distance service provider called LDDS in Mississippi by Murray Waldron, William Fields and Bernard Ebbers.

1988-1994 acquired more than half-dozen communication companies. Its main service was connecting calls between a callers local telephone company and the recipients local telephone company. Worldcom major competitors were AT&T, MCI and Sprint. 1991 and 1993 Worldcom merged with MidAmerican Communication Corporation, Americall, first phone, ATC and other mergers as well.

1993 4th largest company with $1.5 billion revenue. 1994 LDDS acquired Worldcom. 1995 changed its name to LDDS Worldcom. 1998 Worldcom & MCI announced their $37 billion merger. In September 1998 WorldCom made its most aggressive purchase, acquiring MCI, using approximately 1.13 billion of its common shares as well as $7.0 billion cash, for a total price approaching $40.0 billion In 1999, WorldCom added a new component to its bundle of telecommunications services, wireless communications, by purchasing SkyTel Communications, Inc. for $1.8 billion.

1998-2002 2nd largest telecommunication providers in the US after AT&T. WorldComs annual revenue in 1997 reached $7.4 billion. 2000 MCI Worldcom terminated the merger process and renamed itself to Worldcom, it was the end for Worldcom to grow through acquisition because telecommunication industry turned downward.

1988-2002 75 mergers and acquisition of other companies. WorldCom had a four point growth strategy that included: *internal growth

o The selective acquisition of smaller long distance companies with limited geographic service areas and market shares. o The consolidation of certain third tier long distance carriers with larger market shares. o International expansion. With the acquisition of MFS in late 1996 WorldCom entered important new business lines, MFS provided local telephone services. WorldComs year over year revenue growth was over 50% in sixteen of the quarters, and the growth rate was less than 20% in only three of the quarters. This revenue growth led to a steady growth in demand for WorldCom common stock. WorldComs stock price grew from $8.17 at the beginning of 1994 to $47.91 at the end of September 1999 therefore outperforming the return of its largest industry competitors, AT&T and Sprint. After some analysts have expressed concerns about worldcom weakness in wireless technologies; in order to overcome these concerns by announcing in oct, 1999 that WorldCom and Sprint had agreed to merge in a deal valued at $115 billion. WorldCom would gain Sprint s PCS wireless business, as well as long distance and local calling operations. However, the Antitrust Division of the United States Department of Justice refused to approve the Sprint merger on terms acceptable to WorldCom and Sprint, and the companies officially terminated their discussions on July 13, 2000. The termination of this merger was a significant event for WorldCom. Large scale mergers were no longer a viable means of expanding the business. A number of sources pointed out that after this point, Ebbers appeared to lack a strategic sense of direction, and the Company began drifting. Conditions in the telecommunications marketplace became increasingly difficult in 2000.

The regional Bell companies were entering the long distance market, Competition was extremely vigorous, and a number of the competitors were strong. WorldCom s earnings releases highlighted double-digit year-overyear revenue growth throughout 2000, but the reported growth rates declined by a percentage point each quarter.After the failure of the Sprint merger How did it grow? It grew rapidly through acquisitions and increased demand for telecommunication services. Continuous increase in stock values facilitated acquisitions.

In July of 2002, Worldcom filled the biggest bankruptcy ever in the US history with a $41 billion dollar debt load and more than $107 billion in assets. Filling chapter 11 bankruptcy due to: o Fraud o Managerial issues after mergers o Board of director failure

Incentives:
The Compensation Committee dispensed extraordinarily generous rewards without adequate attention to the incentives they created, and presided over enormous loans to Ebbers that we believe were antithetical to shareholder interests and unjustifiable on any basis. Directors received compensation consisting of both cash and stock options, with overall compensation heavily weighted toward stock options. Directors received an annual retainer of $35,000 plus $1,000 for each Board meeting they attended. Committee members received $750 for each meeting attended on the same day as a Board meeting and $1,000 for each meeting attended on a day when a Board meeting did not also occur.

Committee chairpersons received an additional $3,000 per year. Directors could elect to receive in stock all or a portion of their annual retainer for services as a Director and chairperson of a committee. Directors also received options to buy shares of Company stock. In 1999, non-employee Directors were granted options to purchase 15,000 shares. In 2000 and 2001, non-employee Directors were granted options to purchase 10,000 shares. Officer Directors were granted options during those years to purchase amounts ranging from 240,000 to 1.2 million shares. Because many of WorldComs Directors had held substantial stakes in companies acquired by WorldCom, they owned a significant amount of WorldCom stock. At some point between 1999 and 2002, eight of the fifteen Directors each owned over a million shares of WorldCom stock. None owned more than one percent of WorldComs outstanding stock. The Compensation Committee set the salary and bonus of Ebbers, Sullivan and Roberts. Ebbers recommendation was of paramount importance in setting executive base salaries: for example, it was at his urging that Roberts salary was maintained at $1,050,000 after the MCI merger. Ebbers was ranked among the highest paid Chief Executive Officers in the nation several years in a row, and Sullivan was ranked among the highest paid Chief Financial Officers in new economy businesses. From 1998 through 2001 Ebbers received approximately $1 million per year in base salary plus options for well over one million shares of stock per year. For the same time period, Sullivan received annual compensation between $600,000 and $700,000 in base salary plus options for 600,000 to 900,000 shares of stock per year. Ebbers and Sullivan also each received a $10 million retention bonus in 2000.

The Compensation Committee administered two bonus programs during the relevant period. *The Companys Performance Bonus Plan: which began in 1997, required, that an executive officer achieve a ten percent increase in revenue for his or her unit over the same time period the previous year. This focus on revenues is noteworthy; it created an incentive to sustain even unprofitable operations that provided revenue and it created great pressure to report double digit revenue growth; which may have played a role in motivating the improper entries that inflated revenues to that level during portions of 2000 and 2001. A second bonus program, the Compensation Committee awarded retention bonuses: in 2000 and 2001, With the decline in WorldComs stock price and the failed merger with Sprint, the Board was concerned about low morale at the Company, so it instituted a retention bonus program intended to keep key employees in place. The plan required an employee to commit to staying at WorldCom through July 2002. In 2000,employees were awarded upfront bonuses totaling nearly $238 million cash, plus roughly 10 million options. In addition, Ebbers and Sullivan each received a $10 million retention bonus. Employees other than Sullivan and Ebbers were given bonuses in a mix of cash and options, while Sullivan and Ebbers received cash only. It does not appear that anyone challenged the necessity for such substantial payments under the 2000 program, which were made to prevent people from leaving, particularly in light of the locations of WorldComs principal operations. The Compensation Committee was also responsible for administering WorldComs stock option plan. It determined the number of options to be awarded to Ebbers. The Companys proxy statement indicates that the Committee granted options to executive officers based on the

same subjective factors it considered in awarding base salaries. Although not clear, it appears from meeting minutes that the Committee approved grants to other WorldCom officers or employees as recommended by Ebbers.

Characters:
Bernard Ebbers:

Name: Bernard Ebbers Job : Chief Excutive officer at worldcom company Birth: in 1941, Canada Nickname: Bernie Bernard Ebbers was born August 27, 1941 in Edmonton, Canada. Following a basketball scholarship at Mississippi College, Ebbers ran a chain of hotels around the state. In the 1980's, he got involved in telecommunications businesses and co-founded WorldCom in 1995. QUOTES

I just want you to know you aren't going to church with a crook

Scott Sullivan:

Name: Scott Sullivan Birth: 1963, New York He is an American Certified Public Accountant and the former Chief Financial Officer, Treasurer, and Secretary of WorldCom.

Cynthia Cooper:

She is an American accountant who formerly served as the Vice President of Internal Audit at WorldCom. Cooper's book about her life and the WorldCom fraud, Extraordinary Circumstances: The Journey of a Corporate Whistleblower, was published in 2008. Profits from the book were given to universities for ethics education Ronald Beaumont:

Name: Ronald Beaumont Education: Electrical Engineering degrees from Lamar University and Stanford University.

Job: Chief Operating Officer at WorldCom.

Arthur Andersen:

Worldcom outside auditor.