Cooper/WorldCom In 2001, WorldCom was a company at the top of its game. Although 2001 was difficult for them, it was difficult for all telephone companies. The number of local phone companies had dropped from 330 to 150 in 2000. They lost market share and encountered significant competition to their internet services. However, it still had more than $30 billion in annual revenues, and even after extensive layoffs, had over 60,000 employees (Warder, 2004), including Cynthia Cooper, Vice President of Internal Audit. They had over 20 million residential accounts, and business accounts well into five figures (Warder, 2004). They provided internet services to over 100 countries (Warder, 2004).

In spite of industry turmoil, Worldcom was optimistic about its long-term prospects, and CEO Bernie Ebbers continued to make acquisitions for the company, leveraging them with company stock. These efforts put strains on customer support, which appeared to be a major reason for the company's success (Warder, 2004). Gradually, expenses ate further and further into revenues, which should have been reflected in quarterly reports. This would have resulted in a drop in stock value. Complicating things, Worldcom had positioned itself in the stock market as a high growth company, putting further pressures on the company's leaders to prevent any drop in stock prices or returns (Warder, 2004). The Internal Audit department was expected to help demonstrate these goals in the company's financial records (Warder, 2004).

The company's leadership style was autocratic, with employee loyalty a trait that was rewarded even beyond established company policy for both salaries and bonuses (Warder, 2004). It appears that perks for loyalty were given to the Board as well as key employees (Warder, 2004). They used Enterprise Resource Planning (ERP) to streamline costs and keep profits up (Warder, 2004). This put a significant strain...

Gradually, Cooper's department was pressured to use more and more questionable accounting practices to maintain WorldCom's image in financial reports and to demonstrate double-digit growth that did not actually exist (Warder, 2004). They got away with this for a while at least in part because an outside auditing firm, Arthur Andersen, went along with the scheme (Warder, 2004).
In an interview, Cooper commented, "The tone set at the top of an organization can permeate the corporate culture, and it's the actions of the company's executives that establish that climate" (Barrier, 2003). She noted that an inherent conflict of interest exists between an internal auditing department and the company in which it exists, and that it is up to the top executives to establish an atmosphere where honesty is encouraged and unethical behavior viewed as unacceptable.

Ironically, Cooper's original intent was to demonstrate that her department could help them control their bottom line, not become a whistle-blower (Lacayo & Ripley, 2002). When she called a meeting to explain this to the executives, Ebbers was at first resistant, and entered the room half an our late, smoking a cigar, and demanding to know "what the hell" the purpose of the meeting was. Cooper had a well-organized agenda planned, and her first slide demonstrated that she understood the need for the company to keep its profits up. She then demonstrated how her department could contribute to that effort, and won him over (Lacayo & Ripley, 2002).

Cooper became aware that someone was cooking the books almost by accident. A manager in another division noticed in March of 2002 that monies in his division had been moved to boost the company's income. Cooper went to the accounting agency Arthur Anderson, and was told to ignore it. When…