The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
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WorldCom did not achieve its growth by following a<br />
predefined strategic plan, but rather by opportunistic and<br />
rapid acquisitions <strong>of</strong> other companies. <strong>The</strong> unrelenting<br />
pace <strong>of</strong> these acquisitions caused the Company<br />
constantly to redefine itself and its focus. <strong>The</strong><br />
Company’s unceasing growth and metamorphosis made<br />
integration <strong>of</strong> its newly acquired operations, systems and<br />
personnel much more difficult. This dramatic growth<br />
and related changes also made it difficult for investors to<br />
compare the Company’s operations to historical<br />
benchmarks.<br />
V. WORLDCOM’S FINANCIAL STATEMENTS<br />
A. Financial Statements Must Be Prepared According to GAAP<br />
47. As a publicly traded company, WorldCom was required to file<br />
reports, including financial statements, with the SEC. <strong>The</strong> SEC requires that these<br />
financial statements be prepared according to Generally Accepted Accounting<br />
Principles (“GAAP”). See Regulation, S-X, 17 C.F.R. § 210.01(a)(1) (annual and<br />
quarterly financial statements filed with the SEC must comply with GAAP).<br />
GAAP are recognized and used by the accounting pr<strong>of</strong>ession in order to define<br />
acceptable accounting practices at a particular time. Statements <strong>of</strong> Financial<br />
Accounting Standards (“FAS”) are the highest authority in GAAP and are created<br />
by the Financial Accounting Standards Board. GAAP provides other authoritative<br />
pronouncements, including Accounting Principles Board Opinions (“APB”) and<br />
Statements <strong>of</strong> Position (“SOP”) <strong>of</strong> the American Institute <strong>of</strong> Certified Public<br />
Accountants (“AICPA”).<br />
48. If SEC filings do not comply with GAAP, they are presumed to be<br />
misleading and inaccurate, despite footnote or other disclosures.<br />
49. According to WorldCom’s filings with the Securities and Exchange<br />
Commission, press releases and Annual Reports, WorldCom represented to the<br />
investing public that it was a pr<strong>of</strong>itable, growing company. In SEC filings, press<br />
releases and in Annual Reports, WorldCom represented that it had net income<br />
applicable to common shareholders <strong>of</strong> $3,941,000,000 in 1999; $4,088,000,000 in<br />
2000; and $1,384,000 in 2001.<br />
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COMPLAINT
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