Beautiful uncancelled stock certificate from the MCI Worldcom, Inc.
issued in 1999. This historic document was printed by the Security - Columbian Company and has an ornate border around it with a vignette of the company name. This item has the printed signatures of the Company’s President, Bernard J. Ebbers and Secretary, Carl S. Carmen and is over 13 years old.
MCI, Inc. is an American telecommunications subsidiary of Verizon Communications that is headquartered in Ashburn, unincorporated Loudoun County, Virginia. The corporation was originally formed as a result of the merger of WorldCom (formerly known as LDDS followed by LDDS WorldCom) and MCI Communications, and used the name MCI WorldCom followed by WorldCom before taking its final name on April 12, 2003 as part of the corporation's emergence from bankruptcy. The company formerly traded on NASDAQ under the symbols "WCOM" (pre-bankruptcy) and "MCIP" (post-bankruptcy). The corporation was purchased by Verizon Communications with the deal closing on January 6, 2006, and is now identified as that company's Verizon Business division with the local residential divisions slowly integrated into local Verizon subsidiaries.
MCI's history, combined with the histories of companies it has acquired, echoes most of the trends that have swept American telecommunications in the past half-century: It was instrumental in pushing legal and regulatory changes that led to the breakup of the AT&T monopoly that dominated American telephony; its purchase by WorldCom and subsequent bankruptcy in the face of accounting scandals was symptomatic of the Internet excesses of the late 1990s. It accepted a proposed purchase by Verizon for US$7.6 billion.
For a time, WorldCom (WCOM) was the United States's second largest long distance phone company (after AT&T). WorldCom grew largely by aggressively acquiring other telecommunications companies, most notably MCI Communications. It also owned the Tier 1 ISP UUNET, a major part of the Internet backbone. It was headquartered in Clinton, Mississippi, before being moved to Virginia.
CEO Bernard Ebbers became very wealthy from the rising price of his holdings in WorldCom common stock. However, in the year 2000, the telecommunications industry entered a downturn and WorldCom’s aggressive growth strategy suffered a serious setback when it was forced by the US Justice Department to abandon its proposed merger with Sprint in mid 2000. By that time, WorldCom’s stock was declining and Ebbers came under increasing pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses (timber and yachting, among others). During 2001, Ebbers persuaded WorldCom’s board of directors to provide him corporate loans and guarantees in excess of $400 million to cover his margin calls. The board hoped that the loans would avert the need for Ebbers to sell substantial amounts of his WorldCom stock, as his doing so would put further downward pressure in the stock's price. However, this strategy ultimately failed and Ebbers was ousted as CEO in April 2002 and replaced by John Sidgmore, former CEO of UUNet Technologies, Inc.
Beginning modestly in mid-year 1999 and continuing at an accelerated pace through May 2002, the company (under the direction of Ebbers, Scott Sullivan (CFO), David Myers (Comptroller) and Buford "Buddy" Yates (Director of General Accounting)) used fraudulent accounting methods to mask its declining earnings by painting a false picture of financial growth and profitability to prop up the price of WorldCom’s stock.
The fraud was accomplished primarily in two ways:
1.Underreporting ‘line costs’ (interconnection expenses with other telecommunication companies) by capitalizing these costs on the balance sheet rather than properly expensing them.
2.Inflating revenues with bogus accounting entries from "corporate unallocated revenue accounts".
In 2002, a small team of internal auditors at WorldCom worked together, often at night and in secret, to investigate and unearth $3.8 billion in fraud. Shortly thereafter, the company’s audit committee and board of directors were notified of the fraud and acted swiftly: Sullivan was fired, Myers resigned, Arthur Andersen withdrew its audit opinion for 2001, and the U.S. Securities and Exchange Commission (SEC) launched an investigation into these matters on June 26, 2002 By the end of 2003, it was estimated that the company's total assets had been inflated by around $11 billion.
On July 21, 2002, WorldCom filed for Chapter 11 bankruptcy protection in the largest such filing in United States history at the time (since overtaken by the collapse of Lehman Brothers and Washington Mutual in September 2008). The WorldCom bankruptcy proceedings were held before U.S. Federal Bankruptcy Judge Arthur J. Gonzalez who simultaneously heard the Enron bankruptcy proceedings which were the second largest bankruptcy case resulting from one of the largest corporate fraud scandals. None of the criminal proceedings against WorldCom and its officers and agents was originated by referral from Gonzalez or the Department of Justice lawyers.
WorldCom changed its name to MCI, and moved its corporate headquarters from Clinton, Mississippi, to Dulles, Virginia, on April 14, 2003.
Under the bankruptcy reorganization agreement, the company paid $750 million to the SEC in cash and stock in the new MCI, which was intended to be paid to wronged investors.
In May 2003, the company was given a no-bid contract by the United States Department of Defense to build a cellular telephone network in Iraq. The deal has been criticized by competitors and others who cite the company's lack of experience in the area.
Bernard Ebbers began his business career operating a chain of motels in Mississippi. He joined with several other people in 1983 as investors in the newly formed Long Distance Discount Services, Inc. (LDDS). Two years later he was named chief executive of the corporation. The company acquired over 60 other independent telecommunications firms, changing its name to WorldCom in 1995. In 1996, WorldCom acquired MFS Communications, Inc., which itself had recently acquired UUNet and its Internet backbone. At the time, this $12 billion transaction was one of the largest corporate acquisitions in U.S. history, although it would soon be eclipsed by much larger deals, including WorldCom's proposed $40 billion acquisition of MCI.
Ebbers gained public notice on October 1, 1997 when he announced that WorldCom was making an unsolicited bid for MCI Communications. The successful acquisition of MCI was completed in September 1998. The fame from this accomplishment caused Ebbers to receive a number of accolades from the press, including:
Mississippi Business Hall of Fame (May 1995)
Member of Wired 25 (November 1998)
Being named to The 25 most powerful people in networking by Network World (January 4, 1999)
Listing in the TIME Digital 50 (September 27, 1999)
In 1999, Ebbers announced that MCI WorldCom would acquire its rival Sprint Communications for over $115 billion. This transaction, however, was abandoned after U.S. and European antitrust regulators raised objections. This combined with a general downturn in the telecom market resulted in a downturn in WorldCom stock price. Much of Ebbers' personal holdings were purchased with loans that had been backed by his WorldCom stock holdings. As the stock price declined he received a number of margin calls to provide additional collateral for these loans. In an effort to prevent Ebbers from having to sell his shares, the WorldCom board of directors authorized a series of loans and loan guarantees between September 2000 and April 2002.
WorldCom announced the resignation of Bernie Ebbers on April 30, 2002. As part of his departure, Ebbers' loans were consolidated into a single $408.2 million promissory note.
History from Wikipedia and
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