WorldCom's accounting fraud and bankruptcy

Under chief executive Bernard Ebbers and chief financial officer Scott Sullivan, WorldCom disguised billions of dollars in ordinary operating expenses as capital expenditures between 1999 and 2002, a classification that let the company spread costs out over many years instead of recognizing them immediately, artificially boosting reported profit. The fraud eventually totaled more than $9 billion in false or unsupported accounting entries, uncovered by the company's own internal auditors in June 2002 and confirmed shortly after by the Securities and Exchange Commission. WorldCom filed for Chapter 11 bankruptcy protection in July 2002, the largest bankruptcy filing in US history at the time, eclipsing Enron's from the previous December. Ebbers was convicted of conspiracy, securities fraud, and filing false regulatory documents, and was sentenced to 25 years in federal prison in 2005. The case, alongside Enron's, became one of the primary drivers behind the Sarbanes-Oxley Act's new corporate-reporting and internal-controls requirements.