This website uses cookies to ensure you have the best experience. Learn more

Mci Fraud Essay

1994 words - 8 pages

Case 1: The Fraud Continues

July 17, 2011

Abstract
Focusing on the internal control weaknesses that existed at MCI, which contributed to the commission of Walt Pavlo’s famous multi-million dollar fraud. Discussing the approach that should have been taken if fraud was suspected and applying one theory related to crime causation of this case. As well as critiquing the ethical behavior of Pavlo and MCI – discussing what actions could have been taken to prevent the crime.

1. Discuss the internal control weaknesses that existed at MCI that contributed to the commission of this fraud.

When we listen to Pavlo and outside sources, like ethics professor Stephen Henn in his book ...view middle of the document...

” And while these memos from Pavlo warning of large amounts of new debt that are inevitable, we do have the facts: MCI recognized $150 million in bad debt impacts during the execution of Pavlo’s fraud (Lyon, Tocco 2008). And no doubt other people were seeing this coming. But there is, without a doubt, a climate and tone at the top of MCI that pushed Pavlo towards a fraud. A climate that pushed employees to “make the numbers work” (Jacka 2004) rather than create new business. And a lack of oversight only fueled the fire. Jacka goes on to say that “the only audit function Pavlo ever dealt with was the one he established.” It’s a comment that says two things: 1) Pavlo had developed the internal controls he was now using – creating an employee capable of intelligent fraud and manipulation and 2) MCI was not monitoring their employees actions in a responsible, ethical fashion.
Ultimately, the internal control weaknesses inside MCI are twofold. The push to conceal and rework debt and receivables created a climate of unethical accounting practices – a mantra that came from upper management’s inability to lead employees in an ethical manner. And second, a lack of internal auditing function allowed the problem to persist longer than it should have. So both a lack of ethical and strong business practice attributed to the internal control problem and the commission of this fraud.

2. Identify and justify the approach you would take if you suspected fraudulent activity within an organization where you work.

I think you have to start with legal counsel, an investigator or a previously laid out approach from similar situations. But an interview must take place with suspects, potential informants and anyone who may be related. The questions must be tactful. The Association of Certified Fraud Examiners (ACFE) offers a ten-question approach that takes the interviewer from nonthreatening “calibration” questions like “how long have you been with the company” all the way to “who in this company…is beyond suspicion [of] fraud.”(ACFE 2008)
Certainly, it would be nice to be able to care of this “in house.” But listening to Certified Fraud Examiners like Steve Franklin, Director of CBIZ, who can “identify and analyze patterns of financial behavior indicative of fraud,” we hear things like “every month [the owner] should select six to twelve checks and request to see the backup for these checks” (Franklin 2011). And hearing this and other techniques, it becomes apparent that CFE’s can bring any number of new ideas and investigative techniques to a fraudulent situation. Because of the complexity of new internal controls and accounting techniques, financially fraudulent activities need an expert to assist in the investigation.
I would take the time to hire a CFE for, at a minimum, some initial guidance before beginning the investigation. After contact with a CFE, I would contact the creator of any technical system I suspected is involved with the fraud to...

Other Papers Like Mci Fraud

Business Ethics Essay

519 words - 3 pages books” by upper management and he learned how to do it at MCI (Weinberg, 2002). He was expected to manipulate accounts receivables to look as good accounts, when in reality a lot of the accounts were considered bad and weren’t ever going to be paid back to the company. Pavlo goes on to say he took what MCI taught him and used it to commit fraud on the company (Weinberg, 2002). Maybe the company is partly responsible of the unethical actions of

Case 1 and Fraud Continues Essay

1434 words - 6 pages . There are several internal control weaknesses that existed at MCI that contributed to the commission of the fraud acts. One major internal control weakness was that Pavlo was able to manipulate the accounts receivable system and the changes he made to the system was not reviewed or approve by anyone. Another weakness was that Pavlo helped create the accounts receivable process and therefore knew the strengths and weaknesses of the process. This

Examining a Business Failure

644 words - 3 pages obtain UUNet, a major supplier of Internet services to business, and MCI Communications gave WorldCom one of the largest providers of business and consumer telephone service. By 1997, WorldCom's stock had risen from pennies per share to over $60 a share. Through what appeared to be a prescient and successful business strategy at the height of the Internet boom, WorldCom became a darling of Wall Street. In the heady days of the technology bubble

Ethical Behavior in Finance Reporting

780 words - 4 pages Over time, many unethical accounting scandals existed. The WorldCom scandal is one of the most known unethical scandals. WorldCom submitted the largest bankruptcy filing in United States’ history after admitting improperly accounting for more than $3.8 billion dollars in expenses (Moberg, 2012). The company used acquisitions to spurt large growth. Two of WorldCom’s acquisitions included MCI Communications and MFS Communications (UUNet). This

History of Accounting Regulation in Fiji

1584 words - 7 pages arrested on charges of fraud and misrepresentation. Adding fuel to the fire was the fact that Arthur Anderson was WorldCom's auditor while the inappropriate accounting was taking place.2 | | However, Arthur Andersen tried to wash its hands off the crisis stating that it was not aware of the accounting discrepancies. They accused Sullivan for withholding crucial information about book-keeping practices followed at WorldCom. With the sudden

The Worldcom Fraud

3511 words - 15 pages AVOIDING INVESTMENTS IN FRAUDULENT COMPANIES: THE WORLDCOM FRAUD Introduction The purpose of this report is to investigate and discuss the accounting fraud that occurred at WorldCom in order to recommend improved strategies to Berkshire Hathaway’s management for avoiding investments in companies with fraudulent financials. Accounting fraud is a crime committed by high level employees at an organization to manipulate the organization’s

World Com

1165 words - 5 pages experienced rapid growth through the 1990s and when it purchased MCI in 1998, it was approaching the top. There were plans by the management to have the largest merger by communications companies but the US department of justice and the European Union foresaw an eminent period of monopoly, they stopped the move. Some companies were therefore left out in the merger of 2000. The company however experienced the biggest bankruptcy and accountancy fraud in

Sec Investigation of Worldcom

2888 words - 12 pages keep going up and up. The stock splits, and because of the stock option, instead of a dividend the employees get more stock. Then all of a sudden one March morning all these millionaire managers wake up to discover they are not only now worth just a few hundred bucks, but that their jobs were disappearing. This situation was a reality for many WorldCom workers, because on that March morning America’s largest fraud at the time had been reported

Uop Law421 Week 5 Article Review

835 words - 4 pages number of corporate fraud scandals and that were brought into the public eye starting in 2000. The most central figure in the seeming outbreak of corporate scandals was MCI WorldCom CEO Bernard Ebbers (Melvin, 2011, p. 424). The purpose of the Act was to increase controls and regulation on businesses to prevent fraud and illegal activity. The SOA focuses on three main areas: auditing, financial reporting, and internal corporate governance. It

Mba 590 Managing Project Risk

4119 words - 17 pages WorldCom saw the value of its stock reach $64 per share (Moberg & Romar). The growth of the company was based on the acquisition of 65 companies for which $60 billion was spent. During this time $41 billion in debt was entered into the picture. WorldCom stock was very desirable and was used in the purchase of other companies. In 1997, WorldCom made a $30 billion offer to purchase MCI, while assuming $5 billion of MCI debt. This was a counter

Mancon Paper

2658 words - 11 pages interviewee (Scott, Cynthia, The Employees, Andersen, David Myers, Bernard Ebbers) Frame 1 (Interrogation of David Myers) Ivy: What was your involvement in the WorldCom accounting fraud? David Myers only smirks confidently. Ivy: Mr. David Myers, let’s not play games here. You were controller for WorldCom. We know what you did. So, why don’t you just get this over and done with? How did you commit the fraud? He only smirks even more. Quite

Related Essays

And The Fraud Continues Essay

1452 words - 6 pages And the Fraud Continues Tanya Niessen Professor Bill Makkawi Forensic Accounting April 22, 2012 Existing Internal Control Weaknesses at MCI There were several existing internal control weaknesses at MCI in which Walt Pavlo used to his advantage when he perpetrated the fraud. One weakness was that Pavlo helped create the accounts receivable process and therefore knew the strengths and weaknesses of the process (Lyons & Tocco, 2007

Mic Risk Management Essay

1073 words - 5 pages seeking full payment of severance pay and benefits based on the WorldCom Severance Plan. The "5100" stands for the number of WorldCom employees laid off on June 28, 2002 before WorldCom filed for bankruptcy. On February 14, 2005, Verizon Communications agreed to acquire MCI for $7.6 billion. On March 15, 2005 Bernard Ebbers was found guilty of all charges and convicted of fraud, conspiracy and filing false documents with regulators—all related to the

Corporate Scandal Essay

735 words - 3 pages fraud, and filing false statements on September 27, 2002), former accounting director Buford Yates (pleaded guilty to conspiracy and fraud charges on October 7, 2002), and former accounting managers Betty Vinson and Troy Normand (both pleading guilty to conspiracy and securities fraud on October 10, 2002) (MCI, 2006). "WorldCom Scandal: A Look Back At One Of The Biggest Corporate Scandals In U.S. History" (2007)

Effect Of Behavior Article Essay

313 words - 2 pages to get more investors. The most notable company to crash was Enron, followed by Global Crossing which is the parent of MCI, and Xerox; later, almost one thousand publicly traded companies restated their financial statements. This resulted in almost $6 trillion of stock market value disappearing (Cunningham, 2003). I decided to do more research to see how many scandals such as these have occurred over the years before the act was created. Phar-Mor