Word: worldcom
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Dates: during 2000-2009
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...group discovered a gaping hole in the books. In public reports the company had categorized billions of dollars as capital expenditures in 2001, meaning the costs could be stretched out over a number of years into the future. But in fact the expenditures were for regular fees WorldCom paid to local telephone companies to complete calls and therefore were not capital outlays but operating costs, which should be expensed in full each year. It was as if an ordinary person had paid his phone bills but written down the payments as if he were building a phone tower...
Internal auditors, by definition, work in pursuit of a gotcha. So discoveries like this produce a strange "adrenaline rush," says a WorldCom audit employee, "and at the same time, there's a great sadness." Cooper's mother Patsy could see that the investigation had taken its toll. "I noticed a change in her countenance," she says. "There was no cadence to her speech. I noticed a lack of, well, it seemed to be energy...
...called Cooper and gave her 10 minutes to come to his office and describe what her team was up to, says a source involved with the case. She did, and Sullivan, known for his poker face, remained calm. He then asked her to delay the audit, according to a WorldCom timeline of events filed with the SEC. She told him that would not happen. The meeting was a turning point for her because she, like her colleagues in the industry, considered Sullivan the gold standard. "It was terribly disappointing," says Cooper...
...next day, Cooper told the head of the audit committee about her findings, but she still held out hope that there was a reasonable explanation. She and her team began looking for ways to somehow justify what they had found in the books. Finally, they confronted WorldCom's controller, David Myers, who admitted he knew the accounting could not be justified, according to an internal-audit memo...
That's when Cooper's heart sank. Soon after, she called her mother in exhaustion. "'There are some things terribly, terribly wrong at WorldCom,'" Patsy remembers her daughter saying. "And I was just pained at the tone of her voice." Several times Cooper told her colleagues she was concerned about what this would mean for the families of implicated WorldCom executives. "One of the things about Cynthia," says an employee who has worked closely with her, "is that if she has to step on toes, she's not uncomfortable doing that. But at the same time, she has great empathy...