Saturday, October 08, 2016

Lessons from Cynthia Cooper and the WorldCom Fraud

"Whether we are found out or not, when we make decisions that go against our values, our lives start to implode." 
~ Cynthia Cooper, WorldCom Whistleblower

Cynthia Cooper planned to live a relatively peaceful, quiet life. Life in accounting generally was rather low-key. Cynthia started working as chief auditor for WorldCom in her hometown of Clinton, Mississippi in 1994. A town with a population of less than 25,000 people, Clinton and its residents were extremely proud to be the headquarters to this Fortune 100 company. In the 1980s and 90s, WorldCom grew to be one of the largest, most successful companies in the United States, second in its industry only to AT&T. That all ended in the early 2000s, when Cynthia, as head of internal audit, unenviably became the whistleblower to a 3.8 billion dollar fraud scandal, the largest incident of accounting fraud in The United States at the time..

A few weeks ago, I had the opportunity to hear Cynthia Cooper speak about her experience, her over-night leap to front page of the Wall Street Journal, and what has happened in the years since. This opportunity was especially exciting to me because I just started my Executive MBA and learned more about Cynthia and WorldCom in my first accounting class.

"Most financial fraud happens in round numbers," Cynthia said.

As we ascend a mountain, Cynthia warned, we can sometimes be blinded by the summit. We can walk right through ethical dilemmas as we try to meet our goals. Senior management at WorldCom were pressured to meet guidelines and expectations of Wall Street. And they bulldozed right through that ethical dilemma, making one wrong choice after another. Quiet, seemingly little, adjustments to their financial statements.

No adjustment to a financial statement is a little deal. It's a very big deal.

Cynthia and her team worked diligently, often through the night so as not to draw too much attention, to investigate suspicious journal entries in an account call prepaid capacity.

Bringing questions to senior management did no good because their answers just got weirder and weirder. She knew she was uncovering something that people were trying to hide.

During the months of her internal investigation, her head was spinning, her stomach queasy, but she continued on, often repeating the 23rd Psalm in her mind.

1 The Lord is my shepherd; I shall not want.
2 He maketh me to lie down in green pastures: he leadeth me beside the still waters.
3 He restoreth my soul: he leadeth me in the paths of righteousness for his name’s sake.
4 Yea, though I walk through the valley of the shadow of death, I will fear no evil: for thou art with me; thy rod and thy staff they fcomfort me.
5 Thou preparest a table before me in the presence of mine enemies: thou anointest my head with oil; my cup runneth over.
6 Surely goodness and mercy shall follow me all the days of my life: and I will dwell in the house of the Lord for ever.

Cynthia's team uncovered $3.8 billion in fraud before they blew the whistle and turn it over to the SEC. Following the investigation by the SEC in 2003, it was determined to be even more. WorldCom's assets has been inflated by around $11 billion, making it the largest incidence of accounting fraud in U.S. history. I'd say that's a big deal. A big enough deal that five people went to prison due to their actions.

Unlike most whistleblowers, who leave their company within a year, Cynthia stayed on for two more years after the scandal went public. Two more very difficult years.

Imagine being the person who was seen as the cause of people losing their jobs and the company going into bankruptcy. Her life and her family's lives were up-ended and on edge. Her face was on the front of the WSJ; reporters were standing on her doorstep and on her parents' doorstep; and she found herself looking through the yellow pages for an attorney. Cynthia was not living the quiet, peaceful life she imagined.

During the internal investigation, the aftermath of the fraud going public and then being investigated by the SEC, Cynthia said the greatest peace came when she started to read the New Testament.

"In many ways, this story is about human nature, about people and choices," writes Cynthia in the epilogue of her new book, "Extraordinary Circumstances: The Journey of a Corporate Whistleblower." "It shows how power and money can change people, and how easy it is to rationalize, give in to fear, and cave under pressure and intimidation."

"Whether we are found out or not, when we make decisions that go against our values, our lives start to implode," Cynthia Cooper warned.

There are ethical battles of all kinds in the business world. Cynthia gave four main tips of wisdom to consider.

1- Know what you stand for - write your own mission statement. Be intentional.
2- Find courage - courage to stand in the face of fear.
3- Don't ever let yourself be intimidated. Ask yourself how you would feel if your face were on the front page of the Wall Street Journal.
4- Don't keep it to yourself. Just because it's legal doesn't mean it's ethical. Ask yourself, "do my decisions line up with my core values?"

One thing that really stuck with me was the story of Betty Vinson, one of the two accountants who were convicted along with three other C-suite executives. Betty, testified that she was pressured by superiors to make the false entries. "I felt like if I didn't make the entries, I wouldn't be working there," she testified. She lacked the courage that Cynthia talked about having in the face of fear.

"The very darkest times cause us to change the most. [You need to] find out, decide what is most important." ~ Cynthia Cooper

Betty was afraid she wouldn't have a job if she didn't do what she was asked. To me, that means she was not in a personal financial position to rock the boat. The takeaway for me? Be courageous; do not be intimidated; do the right thing; AND be prepared financially to get up and walk away from a situation where you are asked to do unethical things. If you have your finances in order and are able to turn and walk away, you will be much less likely to make decisions that are not in line with your values.

Cynthia said, "The very darkest times cause us to change the most. Find out, decide, what is most important." What should be most important is your character, your moral compass, your values. That is who you are.

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