Cynthia Cooper helped expose massive fraud at WorldCom. It lost her money, health, privacy.
By Patricia HornInquirer Staff Writer
Cynthia Cooper knows the price for blowing the whistle on corporate fraud: grief, depression, legal fees, loss of work colleagues, and dealing with intrusive questions from the press.
She knows the price because, as the chief audit executive at WorldCom Inc., she paid them. Cooper led a team of internal auditors in exposing $3.8 billion in fraud at WorldCom in 2002.
Prosecutors now tabulate the extent of the WorldCom accounting fraud at $11 billion.
The company, which only months before had lost its trademark founder and chief executive officer, Bernard Ebbers, soon saw its chief financial officer, Scott Sullivan, fired, and the company file bankruptcy after WorldCom exposed the $3.8 billion in financial misstatements.
Ebbers, Sullivan and other WorldCom employees were convicted or pleaded guilty to the fraud. Ebbers is now appealing his conviction and 25-year sentence. Sullivan got five years after testifying against Ebbers.
WorldCom's collapse hit hard in Cooper's home state of Mississippi, where WorldCom was the state's only Fortune 500 company, and around the investing world.
Cooper knew Ebbers, whom she calls a generous person; she knew Sullivan; she knew the accounting team her team ended up exposing.
Cooper suffered grief and depression. She lost weight. She couldn't sleep. To help her through, "my father would sit at the foot of my bed reading and rereading the 23d Psalm," she said in a speech yesterday to the Philadelphia Chapter of the National Association of Corporate Directors. Despite the toll, Cooper said she would do it again. "The decision was easy," she said. "But doing the right thing doesn't mean there won't be any cost."
Cooper, who along with two other women who became whistle-blowers were named Time magazine's Persons of the Year for 2002, now delivers that message to corporate directors, companies and students in her new life as a speaker and corporate consultant. She left WorldCom after 10 years in July 2004.
"I think all the people involved in the fraud knew what they were doing," she said.
They went along for a variety of reasons, including fear of losing their jobs. But character, she said, is not forged in a crisis. "It is built decision by decision by decision. The small decisions
Exposing the fraud, she explained, created more tough times for her, her colleagues, and other WorldCom workers. "Thousands and thousands of coworkers were laid off, in wave after wave," she told the audience. "Thousands of people lost their life savings, including members of my family."
During the WorldCom investigation, gun-toting FBI agents showed up at Cooper's office, took her hard drive, downloaded her voicemail, and copied documents. Shredders were hauled away on dollies.
Cooper and her group realized their offices were being visited at night by investigators.
Ultimately, she saw Ebbers, Sullivan and others arrested. "I knew their families and their husbands and wives," she said. "I had celebrated the birth of the CFO's new baby at a baby shower." She still sees the director of accounting at church each Sunday.
Corporate directors can do a lot to help prevent or detect fraud, Cooper said. She recommends that large companies appoint ethics directors who answer to the CEO.
She also recommends that directors ask their auditors questions suggested by Warren Buffett in his 2002 Berkshire Hathaway Inc. annual report.
Among them: If you were responsible for preparing the financial statements, would you in any way have prepared them differently? And, if you were an investor, would you have received the information essential to your understanding the company's financial performance during the reporting period?
Cooper also recommends that directors ask the company's auditors if they deem any areas of accounting too aggressive. Do they have real-time access to the company's accounting system, or do they have to rely on management to provide the information? Is the firm one the auditor deems "high risk"?And, she said, more directors need to have "backbone.
