WorldCom and Satyam: Accounting Scams in the US and India
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With the sudden revelation of accounting irregularities, a series of events followed at both WorldCom and Satyam. A severe cash crunch at WorldCom forced it to lay off 17,000 workers, which constituted 20 percent of its global workforce. Eventually, the financial crisis forced WorldCom to file for reorganization under Chapter 11 of the Bankruptcy Code in July 2002. Subsequently, the company wrote down around US$ 82 billion (over 75 percent) of its reported assets. At this stage, the Board of Directors at WorldCom established a special investigation committee with the stated responsibility of conducting a full and independent investigation into the accounting irregularities that took place at WorldCom. The startling revelation by Raju in the Satyam case only served to deepen concerns about poor corporate governance practices in other companies in India as well. At this juncture, the Government of India intervened and constituted a new board for the company. The board immediately reassured Satyam’s employees and clients, raised money for working capital, and appointed new auditors to restate the accounts.
WorldCom Group, Satyam Computers Services Limited, MCI, Mahindra Satyam, Maytas Infra, Maytas Properties, SEBI, Arthur Andersen, Security and Exchange Commission, PricewaterhouseCoopers, telecommunication industry, information technology, accounting scandal, Chapter 11 of the US Bankruptcy Code, financial statements, corporate governance, corporate code of conduct, internal audit, whistleblower policy, fraudulent/unethical practices, merger, takeover, economic recession, General Accepted Accounting Principles, global financial crisis, forensic accounting, external auditors, board of directors
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