What was the whistleblower’s path to coming forward?
Cynthia Cooper was raised in Clinton, Mississippi — home to the headquarters of WorldCom, the telecommunications company on whom she would eventually blow the whistle. In an interview for Fraud Magazine, Cooper noted that WorldCom was the only Fortune 500 company headquartered in Mississippi, “truly a Cinderella story for what has long been one of the poorest states in the nation.”
In The Wall Street Journal, Cooper described being terrified to tell her parents what she had uncovered, because they were so proud of the company and what it had done for the community. But she also said her mother had told her, “Don’t ever allow yourself to be intimidated,” which gave her the courage to report the wrongdoing.
Cooper was Worldcom’s Vice President of Internal Audit in the summer of 2002 when she discovered accounting entries indicating large transfers of capital from the company’s income statement to its balance sheet. With her team of auditors, she unearthed $3.8 billion of fraudulent entries. Cooper and her team then questioned company accountants, some of whom revealed that they were instructed to make entries without seeing support for them by the Corporate Controller and the General Accounting Director. After finding more suspicious entries, Cooper’s team asked KPMG to conduct a review, which confirmed that the company was fraudulently moving capital across accounts. In light of these findings, the WorldCom board demanded that the controller and the accounting director resign.
On June 25, 2002, WorldCom executives briefed the Securities and Exchange Commission (SEC), and WorldCom publicly admitted it had overstated its income by $3.8 billion, which was then the largest instance of accounting fraud in US history. The story of WorldCom’s fraud broke in major media outlets including The Wall Street Journal, The Guardian, The New York Times, The Washington Post, and others.
Cooper was not named until October of that year, when she and members of her team were profiled in a Wall Street Journal piece, “How Three Unlikely Sleuths Exposed Fraud at WorldCom,” which chronicled their discovery from beginning to end but did not feature direct quotes from Cooper.
In a Q&A, reporter Amanda Ripley noted that Cooper gave her first on-the-record interview when TIME named her a 2002 Person of the Year alongside fellow whistleblowers Coleen Rowley and Sherron Watkins. Ripley said Cooper was “not excited to hear from [them]” as she had never intended to go public — however, a member of Congress had released her internal audit to the press. According to TIME, Cooper relented on her wish to remain anonymous when given the opportunity to meet Rowley and Watkins.
What were their motivations?
In a 2008 Fraud Magazine interview, Cooper said she wanted to share her story because she believes there are “valuable lessons that can be gleaned and shared with the next generation” and hopes to encourage others going through similar situations. She also told TIME that “it would have been helpful to me to understand what whistleblowers go through” when she was first weighing her decision; eventually, she dedicated a chapter in her book for that purpose.
What was the initial reaction to their story?
As noted above, the WorldCom scandal created a stir among major news outlets. Many implied this story was a sort of reckoning for Wall Street and its fraudulent history, particularly because it followed on the heels of the Enron scandal.
The SEC slapped the company with a $750 million settlement to compensate investors, then-CEO Bernard Ebbers was sentenced to 25 years in prison, and nearly 30,000 jobs were lost. One month later, WorldCom filed for bankruptcy. Then in July 2002, Congress passed the Sarbanes–Oxley Act, aimed at protecting investors from corporations’ fraudulent financial reporting by amping up existing securities regulations and imposing new penalties on violators. Although the act’s passage is also attributed to the Enron scandal, The New York Times claimed Ebbers himself was “responsible for the most far-reaching change in American securities laws since the Depression.”
How did those being exposed react?
Cooper told Fraud Magazine she faced “a multitude of challenges” from WorldCom management while she was auditing. She claimed then-CFO Scott Sullivan behaved aggressively toward her, even tracking her down outside the office to chastise her for questioning the company’s allowance. She was also told by the controller that she and her team were wasting their time auditing the expenditures.
When Cooper’s team submitted their findings, WorldCom’s board gave Sullivan the weekend to explain the accounting discrepancies. After reading the white paper he wrote in his defense, they asked him to resign.
Upon emerging from bankruptcy, WorldCom changed its name to MCI, and was eventually acquired by Verizon Communications in 2006.
How did public opinion change?
At the time, some argued that public outrage from the scandal heavily influenced Republican support for the Sarbanes–Oxley Act, as legislators were up for midterm elections in November 2002. Additionally, a 2002 Gallup poll revealed that the percentage of Americans who rated the honesty and ethics of business executives “positively” dropped from 25% to 16% in the time surrounding the scandal.
Where is the whistleblower now?
Cooper eventually published a book about the ordeal, called Extraordinary Circumstances: The Journey of a Corporate Whistleblower, in 2008. She is now the CEO of CooperGroup, a consulting firm specializing in ethics and compliance, governance, fraud prevention and detection, and internal audit.
