Understanding WorldCom’s Accounting Fraud: Did Groupthink Play a Role?

accounting fraud in U.S. history. WorldCom, now called MCI, emerged from bankruptcy protection on April 20, 2004 after being fined $750 million. In total, WorldCom reported accounting irregularities of $11 billion. While employees and investors look for individual culpability, much of WorldCom’s organizational structure and culture potentially contributed not only to the fraud but also to the length of time over which it occurred. In many ways, groupthink may help explain some of the issues and fraudulent activities at WorldCom as well as the pressures that were placed on employees extending the period over which the fraud occurred. We were duped, how could we have been so stupid, and the more humorous my 401 K is now a 1 DI K. These and many others are all sentiments heard around the halls and coffee machines at WorldCom (now named MCI) after the largest accounting fraud in history occurred. Currently the nation’s second largest long-distance phone company, MCI is headquartered in Ashburn, VA. MCI emerged from bankruptcy protection on April 20, 2004 reporting accounting irregularities of $11 billion (Young, 2004). Young (2004) reported that the company, as part of a settlement with the Securities and Exchange Commission (SEC), will pay fines totaling $750 million and former bondholders will receive 36 cents on the dollar in stock and bonds in the new company. According to U.S. District Judge Jed Rakoff, Richard Breeden, the court appointed bankruptcy monitor, will probably stay on for an additional two year