WorldCom's whistle-blower tells her story
-- Cynthia Cooper is not a politician and has never run for public office. And yet without her efforts, the Sarbanes-Oxley Act — the most sweeping investor-protection legislation passed by Congress since the Great Depression — might never have been enacted.
Six years ago, following the collapse of Enron, angry lawmakers held hearings, threatened auditors and warned CEOs that sleight-of-hand accounting tricks would not be tolerated. The Justice Department even indicted one auditing firm, Arthur Andersen, essentially putting it out of business.
But by June of 2002, the sound and fury surrounding Enron's collapse had subsided. Congress planned to pass some form of legislation, but the passions that swayed lawmakers in the winter of 2002 had eased. Business as usual was coming back into fashion.
Then WorldCom dropped a bombshell: It disclosed a $3.8 billion accounting fraud of its own, sowing panic among investors. The company filed for bankruptcy protection, wiping out its shareholders, and the public demanded immediate action. Congress complied, passing the law known as the Sarbanes-Oxley Act.
But the only reason WorldCom's board of directors discovered the accounting fraud was through the efforts of the company's internal auditor, Cynthia Cooper, and her dedicated subordinates.
For her efforts, Cooper was named one of Time magazine's "persons of the year" for 2002, along with whistle-blowers Sherron Watkins of Enron and FBI agent Coleen Rowley.
Since then, Cooper, 43, has maintained a low profile, giving speeches to universities and trade groups.
Now, with the publication of her new book, Extraordinary Circumstances: The Journey of a Corporate Whistle-blower, (Wiley, 367 pages, $27.95) we finally get an inside account of what really happened at WorldCom.
It's a powerful tale. Cooper's story has been partially told before, most notably in The Wall Street Journal and in a report prepared for WorldCom's board of directors.
But her adventures at WorldCom come to life in this first-person account. The Mississippi native describes how, early in 2002, at the request of a colleague, she began investigating some unusual accounting entries over at WorldCom's wireless division. Little did she know at the time, but Cooper had picked up a thread that would eventually lead to WorldCom's accounting manipulations.
She approaches a partner at WorldCom's auditing firm, Arthur Andersen, to discuss the matter further. The Andersen partner assures her that any aggressive accounting entries in wireless are balanced out on a corporationwide basis.
The next day, Cooper leaves work early to squeeze in an appointment at the hairdresser. With an 8-month-old daughter at home, it's a rare opportunity for some quiet time. But while she's in the middle of the bleaching process, shrouded in tin foil, with hairdryers blaring all around, she gets a call saying that Scott Sullivan, WorldCom's boy-wonder chief financial officer, wants to speak to her immediately.
She phones in to the office, and Sullivan chides her for snooping around the wireless accounting treatments. He tells her not to discuss the matter with Andersen auditors, but to channel all her queries through his own deputy, David Myers.
It's like a scene from a Lifetime "Moment of Truth" movie. Cooper has no idea that Sullivan is hiding a massive fraud that will result in the biggest bankruptcy in U.S. history, sending him and his boss to jail, but her gut instinct tells her that something is amiss.
"No one wants to believe their boss is perpetrating a fraud," says Cooper during an interview last week at a Manhattan hotel, where she was promoting her book. "You want to believe there is a valid explanation."
After several months, Cooper's team figures out that Sullivan's department has made $3.8 billion in questionable accounting entries that had the effect of inflating WorldCom's earnings.
Despite being lauded months later in Time magazine, Cooper says she never felt like a hero. Just the opposite: In the aftermath of the disclosure of the fraud, with the press and lawyers and congressional investigators constantly on her trail, Cooper is seized by depression and anxiety. She comes to understand that her life will never be the same.
Sullivan, the CFO, ultimately pleaded guilty to several crimes and testified on behalf of the government against WorldCom CEO Bernie Ebbers. Ebbers was convicted and sentenced to 25 years in prison. Sullivan, because of his cooperation, got five years.
These days, Cooper spends most of her time talking to high school students and college students, urging them to be prepared for that moment when an ethical choice presents itself. "People don't often realize that they're facing a dilemma," Cooper says. "There are a lot of pressures that come to bear in the workplace, and people should prepare beforehand."