Top executives at WorldCom resorted to financial gimmickry, deception and outright fraud in an attempt to disguise the company's eroding prospects, suppressing challenges from within, according to two new reports examining the downfall of the second-largest long-distance telecoms company in the US.
The reports pinned much of the blame on founder and former chief executive Mr Bernard Ebbers, who they said created an environment in which meeting Wall Street's expectations was paramount and warnings about suspect accounting were met with ridicule and abuse.
"The fraud was the consequence of the way WorldCom's chief executive officer, Bernard Ebbers, ran the company," one report read. "He was the source of the culture, as well as much of the pressure, that gave birth to this fraud."
WorldCom filed for bankruptcy last July after revealing a massive accounting fraud. The company has said the improper accounting, which totals $9 billion (€7.7 billion), allowed it to appear profitable during a period it was losing money.
One of the reports, prepared for the company's board of directors, said the fraud occurred when Mr Ebbers's personal fortune was under the greatest pressure, and it noted that the fraud did not come to light until after he left the company.
The report said former chief financial officer Mr Scott D. Sullivan orchestrated the fraud with help from other executives. Ultimately, more than 40 executives have left the company because of their involvement.
The second report was prepared by former US attorney general Mr Richard Thornburgh for a bankruptcy judge in New York.
The two reports collectively cost more than $40 million and reveal an extraordinary corporate atmosphere in which Mr Ebbers ridicules efforts to institute a corporate code of conduct as a "waste of time".
In at least one instance, an employee who challenged questionable numbers was warned figuratively by an executive that he would be thrown out a window if he raised the issue with auditors.
Both reports noted that Mr Ebbers and Mr Sullivan declined to be interviewed. Mr Sullivan has pleaded not guilty to fraud. Mr Ebbers has not been charged.
WorldCom has since been trying to distance itself from the Ebbers era.
Former Hewlett-Packard president Mr Michael D. Capellas joined in December to serve as chairman, chief executive and president and has replaced the entire board.
