Cynthia Cooper - Extraordinary Circumstances

Cynthia Cooper

This book is printed on acid-free paper.

Copyright 2008 by Cynthia Cooper. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Cooper, Cynthia, 1964

Extraordinary Circumstances: The Journey of a Corporate Whistleblower/Cynthia Cooper.

p. cm.

Includes index.

ISBN 978-0-470-12429-1 (cloth)

ISBN 978-0-470-44331-6 (paper)

1. Cooper, Cynthia, 1964-. 2. AccountantsUnited StatesBiography. 3. Whistle blowingUnited States. 4. WorldCom (Firm)Corrupt practices. I. Title.

HF5604.5.C66A3 2008

364.16 8-dc22

[B]

2007033356

To Lance, Stephanie, and Anna Katherine the loves of my life.

I never aspired to be a whistleblower. It wasnt how I envisioned my life. But life is full of unexpected turns.

My team and I were ordinary citizens who found ourselves facing extraordinary circumstances. In 1994, in my late 20s, I took a risk by going to work for WorldComthen known as LDDS (Long Distance Discount Services)establishing a start-up Internal Audit group with only two staff auditors, both of whom had virtually no prior audit experience. WorldCom was an underdog company, with an underdog CEO, headquartered in an underdog state. And while there would be many challenges, what an incredible opportunity my team and I had before us. In my first eight years, company revenues grew from $1.5 billion to over $38 billion. WorldCom transformed from a speck in the industry to one of the largest telecom companies in the world, employing some 100,000 people. We had helped grow a small regional company that bought and re-sold long distance in the South into an international behemoth that operated in over 65 countries.

Setting one record after another, WorldCom boasted what was then the largest acquisition and debt offering in corporate history. The stock price soared and investors cheered as WorldCom delivered some of the highest returns on Wall Street. The stock became the fifth-most widely held; and, in 1996, the Wall Street Journal ranked WorldCom Number One in return to shareholders over a ten-year period.

Bernie Ebbers, our CEO, was larger than life, a local folk hero who lived the rags-to-riches American dream. Coming from very humble beginnings, by 1999 he was Forbes 174th wealthiest American. In addition to the jobs Bernie helped create, he donated millions to charity. There was even speculation that he would one day run for Governor.

Bernie grew the company quickly through acquisition. He was praised in the press as he closed one deal after another, acquiring some 70 companies in just two decades. Bernie was an outsider, a nobody, in telecom, wrote Network World in 2001. Today, hes considered one of the industrys most powerful people.

Scott Sullivan, appointed CFO at the young age of 33, was also highly respected. Wall Street regarded him as a financial wizard and a straight shooter. In 1997, with compensation of more than $19 million, he was the highest-paid CFO in the country. In 1998, CFO Magazine awarded him the CFO Excellence Award for mergers and acquisitions. [Scott] walked on water, the magazines editor said, describing Wall Streets perception of him in the late 1990s.

WorldCom became Mississippis Cinderella storya Fortune 500 company born right here in our state. Mississippi is the place of my birth and home of my people. Roots run deep with a love for rich fields, live oaks, magnolia blossoms, Gulf breezes, fried catfish, sweet tea and the Delta blues. But Mississippi is also poor and carries the burden of a troubled past. WorldCom was one of our greatest sources of pride, a sign that there might be better things in store for our state.

In 1997, the company announced that its headquarters would move from Jackson, the state capital, to Clintona suburb with a population of only 23,000, where my husband and I both graduated from high school and my parents still live. Clinton became one of the smallest towns to host a Fortune 500 company and exploded with commerce.

My nightmare started one hot June day in 2002. For a time, it seemed as if that summer would never end. I was 37 years old and the Vice President of Internal Audit. My team and I began to grow increasingly suspicious of some entries in WorldComs books. The more we investigated, the stranger the reactions from some of our colleagues became. No one would give us a straight answer. People who helped make the entries said they didnt know what they represented, or tried to lead us in the wrong direction.

The CFO asked me to delay our audit work. The Controller insisted that we were wasting our time and should be auditing other areas of the company. The Chairman of the Audit Committeea subset of the Boardinstructed me not to ask for support for the entries, and to wait for Scott, the CFO, to provide me with an explanation.

Id replay in my head, like a broken record, the barrage of comments Id receivedMake sure to separate emotion from business. This is nothing. Youre chasing your tail. If you keep making a big deal of things, youre going to get fired. Youre on Scotts to-do list; he just hasnt gotten to you yet. Youre probably a decent auditor, but you dont have the expertise to be telling someone how to run their business. This is an external-audit issue, not an internal-audit issue. You cant call an Audit Committee meeting. Its not your job to be doing financial-statement auditing, and if you do, it will be low-level work that the external auditors dont want to do.