Extraordinary Circumstances: The Journey of a Corporate Whistleblower
by Cynthia Cooper
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Book Summary Information
Author: Cynthia CooperEdition: Hardcover
Published: 2008-02-04
ISBN: 0470124296
Number of pages: 416
Publisher: Wiley
Book Reviews of Extraordinary Circumstances: The Journey of a Corporate Whistleblower
Book Review: Excellent first book!
Summary: 5 Stars
Cynthia Cooper was a true corporate whistleblower. She became famous, not by choice, but because of the WorldCom financial statement fraud valued at $11 billion. She was the Vice President of Internal Audit at WorldCom, a position that was not easily obtained. She almost single-handedly created the internal audit department at WorldCom, and her book Extraordinary Circumstances: The Journey of a Corporate Whistleblower details the struggle to get management to take internal audit seriously.
Things started going wrong at WorldCom very early. The company went on an acquisition spree, and the merging of many small companies, managers, and accounting systems was a disaster waiting to happen. Cynthia says that WorldCom was much better at acquiring companies than integrating them, and that is clear.
From an accounting perspective, it was next to impossible to create a properly controlled system. There were too many small systems being pieced together, and it was easy for numbers and authorizations to get lost in the shuffle. This struggle is well-documented by Cynthia, who no doubt painstakingly researched the various acquisitions in order to give such a complete history.
At times the book seems to get a little off-topic as Cynthia goes through each player's background briefly. Honestly, that information isn't really relevant to the story and, while it was probably intended to make these characters relatable human beings, it really just serves to make the book longer than necessary. It prolongs the process of getting to the real heart of the story.
I was drawn into the parts detailing the background of Bernie Ebbers and his early entrepreneurial ventures. I don't think Cynthia came right out and said that Ebbers wasn't equipped to run WorldCom, but that's exactly how it appears when you're done reading.
Where this book is so good is in detailing the fraud and how it happened. I don't think most consumers know how and where WorldCom's fraud started: all in the "line costs." You don't need an accounting background to understand the details of the fraud once Cynthia explains how things went down. Earnings were too low and management was, quite simply, looking for a place to reduce expenses.
When management realized they were paying too much for capacity that they weren't selling to customers, it became clear. Take some of those "line costs" and capitalize them, which essentially amounts to moving them off the profit and loss statement (decreasing expenses and increasing profits) and onto the balance sheet (increasing assets).
WorldCom moved those line costs into something that the executives called "prepaid capacity." The company's financials instantly looked better, and CFO Scott Sullivan found that this was an easy way to rehabilitate the financial statements each quarter. Wall Street wanted lots of growth, and that's exactly what the executives delivered by the time the fraudulent accounting entries were completed.
Yet the process of uncovering this fraud, as Cynthia and her team would soon find out, was grueling. Their investigation into the accounting shenanigans was long because the accounting entries behind this manipulation of the financial statements were complex. Hundreds of entries were made to a variety of accounts in order to confuse anyone who might later look at them. And the investigation was hard because management didn't want Cynthia and her people looking into the entries, for obvious reasons.
After the fraud became clear to Cynthia and her team, there was a long fight over whether something should or could be done about it. Scott Sullivan was determined to find an accounting rule to justify the fraudulent accounting entries. It is no surprise that there is not an accounting rule that backs up what was done, because it wasn't done with the accounting rules in mind. It was done with only Wall Street in mind.
And WorldCom's audit committee wasn't completely behind the internal auditors' investigation or results. The audit committee should be the independent group of individuals to whom an employee can voice concerns and be taken seriously. Yet Cynthia didn't seem to be given as much consideration as she should have been, and she relates this struggle nicely in the book.
The story of the investigation comes to life through Cynthia's words. I found myself drawn into the story, and I could feel myself sitting there as the internal auditors were going through entry after entry, always watching their backs because the executives didn't want them investigating.
Lots of clich?s and heartwarming stories of family interactions are woven into the book. Again, these things aren't really all that relevant to the story and merely provided a distraction from the business at hand: the collapse of WorldCom.
These minor criticisms don't take away from the book as a whole. It is a detailed account of what happened, and digs much deeper into the WorldCom fraud than I ever expected. The detail behind how the fraud occurred is told in a fascinating manner, and I found myself able to picture WorldCom executives sitting around and comparing the company's financial results to the expectations of Wall Street ... and making fraudulent accounting entries to meet those expectations.
Congratulations, Cynthia, on a successful first book. And many thanks for being willing to stand up for the truth and fight to expose the WorldCom fraud.
Summary of Extraordinary Circumstances: The Journey of a Corporate Whistleblower
The longer WorldCom Chief Audit Executive Cynthia Cooper stares at the entries in front of her, the more sinister they seem. But the CFO is badgering her to delay her team's audit of the company's books and directing others to block Cooper's efforts. Still, something in the pit of her stomach tells her to keep digging. Cooper takes readers behind the scenes on a riveting, real-time journey as she and her team work at night and behind closed doors to expose the largest fraud in corporate history. Whom can they trust? Could she lose her job? Should she fear for her physical safety?In Extraordinary Circumstances, she recounts for the first time her journey from her close family upbringing in a small Mississippi town, to working motherhood and corporate success, to the pressures of becoming a whistleblower, to being named one of Time's 2002 Persons of the Year. She also provides a rare insider's glimpse into the spectacular rise and fall of WorldCom, a telecom titan, the darling of Wall Street, and a Cinderella story for Mississippi.
With remarkable candor, Cooper discusses her struggle to overcome these challenges, and how she has found healing through sharing the lessons learned with the next generation. This book reminds us all that ethical decision-making is not forged at the crossroads of major events but starts in childhood, "decision by decision and brick by brick."
At a time when corporate dishonesty is dominating public attention, Extraordinary Circumstances makes it clear that the tone set at the top is critical to fostering an ethical environment in the work-place. Provocative, moving, and intensely personal, Extraordinary Circumstances is a wake-up call to corporate leaders and an intimate glimpse at a scandal that shook the business world.
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