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    Corporate Fraud Examples

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    There are several examples of corporate fraud. Some of these are:
    •Adelphia
    •Global Crossing
    •Qwest Communications
    •Rite Aid
    •Tyco
    •WorldCom
    •GlaxoSmithKline

    Choose one of the given examples of corporate fraud and write a 4- to 5-page report in Microsoft Word, addressing the following questions:
    •How was the fraud perpetrated? How much money was involved? Explain.
    •How was the fraud uncovered? How did the law enforcement agency investigate and prosecute the crime?
    •Which laws were violated?
    •What was the outcome of the case?
    •Was this the best possible outcome given the circumstances of the case?
    •Explain how the fraud impacted investors or other victims.

    Be careful in selecting your sources for research. Many people have strong opinions on these subjects and post inaccurate information. Be sure to only use reliable news sources to learn the details related to the example you choose.

    Support your responses with examples.

    Cite any sources in APA format.

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    https://brainmass.com/law/criminal-law-and-justice/corporate-fraud-examples-621766

    Solution Preview

    In accordance with BrainMass standards this is not a hand in ready report but is only background help.
    Step 1
    The example of corporate fraud chooses is WorldCom. When the fraud took place, WorldCom was the United State's second largest long distance telephone company after AT&T. The growth of WorldCom was accomplished by acquiring other telecommunications companies. It also acquired MCI Communications.
    The fraud was perpetrated at WorldCom in two ways. First, the "line costs" were recorded as capital expenditure on the balance sheet instead of being expensed. These were interconnections expenses. The second method was that revenues were inflated with bogus accounting entries from corporate unallocated revenue accounts. The company's total assets were inflated by $11 billion. This made the WorldCom scam the largest accounting fraud in US history when the scam was found in 2003 (a).
    Explanation: When WorldCom's earnings were such that they would not meet the expectation of Wall Street, there was illegal action to increase the revenue of WorldCom. It reduced the amount of money it held as reserve to cover liabilities and moved it to revenues. In addition, WorldCom began classifying operating expenses as long-term capital investments. The expenses that WorldCom paid to lease phone network lines were classified as assets. There was also an entry for computer expenses of $500 million whose supporting documents were never found.

    Step 2
    The fraud was uncovered when tips were sent to the internal audit team and accounting indiscretions were spotted. SEC requested WorldCom to provide more information. The cause of suspicion was that WorldCom was making unusual profit whereas other telecom companies were making losses. An internal audit was carried out and it exposed ...

    Solution Summary

    Corporate fraud is discussed step-by-step in this solution. The response also has the sources used.

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