Advertisement
  1. Archive

She audited and told

Cynthia Cooper, the executive who blew the whistle on fraud at WorldCom Inc., told a group of financial managers in Tampa on Tuesday about the moment her world changed nearly four years ago.

As head of internal audit at the Clinton, Miss., telecom giant, Cooper had asked the company's external auditor, Arthur Andersen, about a questionable accounting maneuver. Word quickly got back to WorldCom's powerful chief financial officer, Scott Sullivan, who tracked her down at her hair salon the next day.

As Cooper stood with highlights and tin foil in her hair and a cell phone to her ear, Sullivan screamed at her for pursuing the issue.

Far from being intimidated by her boss' tirade, Cooper and her team of 18 auditors began working nights and weekends, tracking questionable accounting transactions.

Three weeks later, she presented evidence of $3.8-billion in accounting fraud to WorldCom's audit committee, which fired Sullivan and went public with Cooper's findings.

The result: The business, which founder and chief executive Bernie Ebbers had built into the nation's second-largest telecom company, imploded in the biggest bankruptcy in history. Thousands of Cooper's co-workers lost their jobs and ended up with worthless stock and unfunded pensions. Five WorldCom executives pleaded guilty to fraud, including Sullivan, who was sentenced to five years in jail. Ebbers, who had left WorldCom in April 2002, was found guilty of fraud last year and sentenced to 25 years in jail. He is free pending appeal.

Cooper, now 41, was honored in 2002 as Time magazine's Person of the Year, along with fellow whistle-blowers Sherron Watkins of Enron and the FBI's Coleen Rowley. But on Tuesday, Cooper seemed less a media star than a woman who had survived the brutal reality of life as a whistle-blower.

"The decision to come forward was easy," Cooper said in a soft Mississippi accent. "We found ourselves standing at a crossroads where there was only one right path to take. But doing the right thing doesn't mean there isn't a cost to pay."

Once the fraud became public, her credibility was questioned, federal investigators commandeered her office and questioned her for hours and reporters and TV trucks descended on her home in a suburb of Jackson, Miss. She said the Wall Street Journal threatened to run her high school yearbook picture unless she sent them something better.

"All I could think of was my Farrah Fawcett hairdo," said Cooper, who could not comment to reporters but did supply the Journal with a more recent photo.

Cooper, who lost weight, had trouble sleeping and was often depressed in the aftermath of WorldCom's collapse, said it was her religious faith that helped her through the ordeal.

"I remember many days when my father would sit at the foot of my bed, reading and rereading the 23rd Psalm," she said.

Cooper left WorldCom in June 2004 after it had emerged from bankruptcy and was renamed MCI. She runs a consulting firm outside Jackson, Miss., and is a frequent speaker at professional events and universities. She spoke Tuesday to a joint meeting of the Florida West Coast Chapter of the Institute of Internal Auditors, the Tampa Bay chapter of the Institute of Management Accountants and the West Florida Chapter of Information Systems Audit and Control Association.

"I am every person sitting in this room today," Cooper told the audience of about 200.

"I am an auditor and the mother of two daughters. I want you to think about the decisions you might make and the people who get caught up in fraud. Because we all face ethical decisions every day."

Cooper's local appearance came two days before a St. Petersburg speech by a former executive from another company that has become a poster child of corporate corruption.

On Thursday, Lynn Brewer, former head of risk management at Enron, will talk to the Chamber of Commerce Women's Council about her experience at the Houston energy company, which collapsed a year before WorldCom.

Her speech comes as her former bosses, Ken Lay and Jeffrey Skilling, are being tried on fraud and conspiracy charges in Houston.

In an interview last week, Brewer echoed many of Cooper's themes. Both worked for highly respected and fast-growing companies with aggressive leaders unaccustomed to being questioned by subordinates.

At WorldCom and Enron, executives and rank-and-file employees were dazzled by stock options that inflated their personal wealth. And at both companies, questioning the status quo had spectacular consequences.

By her own account, Brewer, 45, was not as aggressive as Cooper; she did not try to publicize problems until after leaving the company in late 2000.

After discovering that an asset used as loan collateral was not owned by the company, Brewer did as her supervisor told her and left that detail out of her report to Enron's board.

"I was the new employee and I chose to look the other way," said Brewer, who had only been with Enron for six months when the incident occurred. "This is the tale of two equally destructive forces: corruption and complacency toward corruption."

Brewer has written a book about her experience, Confessions of an Enron Executive, and has formed the Integrity Institute near Seattle.

"Enron was not unique, and regulation hasn't solved the problem," Brewer said.

""What shareholders are looking for is transparency, predictability and sustainability and it's not being provided."

Cooper was a bit more optimistic, saying the Sarbanes-Oxley Act has resulted in mandatory fraud hotlines, more active boards and a greater focus on internal controls.

"But you'll never get rid of the ability of executives to collude and override controls," said Cooper, who is writing a book. "The same thing could occur in the future."

Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

YOU MIGHT ALSO LIKE

Advertisement
Advertisement