Role of Internal Auditor Cynthia Cooper

Cynthia along with her team of 24 members formed the internal audit team
department. This team primarily conducted operational audits to measure
business unit performance and enforce spending controls.
Coopers audit revealed that WorldCom and its subsidiaries had a total
capital expenditure of $2.9 billion. Internal Audit also requested an
explanation of Corporates $2.3 billion worth of projects. In response, Cooper
received a revised chart indicating $174 million in expenditures. Rest of the
amount was attributed to metro lease buyout, line costs, and other accruals.
In March 2002, the head of the wireless business unit complained to Cooper
about a $400 million accrual in his business for expected future cash
payments and debt expenses that had been transferred away to pump up
company earnings. Both Sullivan and the Arthur Andersen team had
supported the transfer.
Cooper was the whistle blower informing the audit committee but was
stopped by Sullivan to be away from Wireless Business unit. Cooper decided,
unilaterally and without informing Sullivan, to expand Internal Audits scope
by conducting a financial audit. Cooper asked Morse, who had good
computer expertise, to access the companys computerized journal entries.
Coopers internal audit team, by the beginning of June 2002, had discovered
$3 billion in questionable expenses, including $500 million in undocumented
computer expenses.
On June 20, Cooper and her internal audit met in Washington, D.C. with the
audit committee and disclosed their finding of inappropriate capitalized
expenses.

Role of Betty Vinson

Betty Vinson who was a hardworking and loyal employee joined
WorldCom as a Manager in the International accounting division. Her hard
work earned her a promotion as a Senior Manager in General Accounting. In
October 2000, Vinson and her colleague, Troy Normand were asked to
release $828 million of line accruals into the income statement. A release of
line accrual was made when the bills were lower than the estimation of
expected payments, with the excess flowing into the income statement as a
reduction in line expenses. Vinson and Normand were shocked by this.
Though they initially agreed to make the transfer, they later reconsidered
their decision and planned to resign.
Betty was then convinced by Ebbers that they would not be placed in
such a situation again. Betty decided against quitting since her position with
the WorldCom paid for her familys insurance benefits. Even though she had
doubts about the accounting transfers, she believed that Sullivan with his
whiz kid CFO reputation knew what he was doing.
However in April 2001, Vinson was put in the same difficult position.
The revenues in the quarter had been worse than expected and Sullivan
wanted them to transfer $771 million of line costs into capital expenditures.
Vinson was shocked by this request but was reluctant to quit her job since
she had no other alternative job. She had to distribute the amount across
five capital accounts. Finally the entries were made by Vinson and backdated
to February 2001.
Throughout 2001 Betty had to make similar entries and became
worried. She hoped that it would be the last every time she made such
entries. In early 2002 she received a raise and was promoted as a director. In
April 2002, Betty reviewed the first quarter report which included $818
million in capitalized line costs and thought it would require similar entries
for the remaining year to meet Ebbers projections. Betty along with Yates
and Nortmand made a pact to stop making such entries.