Consider the following:

This phenomenon of confusion ruling in a bullish market is not unique to the 1990s stock market. Following the 1929 stock market crash, one of the biggest collapses, and a shocker to the investment world, was the bankruptcy of Middle West Utilities. The company was run by Samuel Insull according to the prevailing, and confusing, structure of the time, "elaborate webs of holding companies, each helping hide the others’ financial weaknesses, an artifice strangely similar to what Enron did with its partnerships." Following the bubble burst in the early 1970s, accounting firm Peat Marwick, Mitchell was censured for its failure to conduct proper audits of five companies that crashed after PMM had given the firms clean and ongoing entity opinions. After the October 1987 crash, Drexel, Burnham & Lambert, Michael Milken’s junk bond firm, collapsed along with a host of other companies and the savings and loan industry.

What does this market history tell you about WorldCom? How could the employees in WorldCom who went along benefit from this information? What fears did these employees have?

3. Bill Parish, investment manager for Parish & Co., explained the collapse of Enron, World Com, and others with this insight: "There’s massive corruption of the system. Earnings are grossly overstated." Accounting Professor Brent Trueman at the University of California, Berkeley, added," Reported numbers may not reflect the true income from operations." The phenomenon accompanies bubbles. "It is absolutely what almost invariably happens after every bubble. You should expect them [bankruptcies, scandals, and accounting disclosures], but that doesn’t mean that people who haven’t been through it before aren’t going to be surprised. The bigger the binge, the longer and more severe the hangover.

Is he right? Is fraud inevitable in a fast-paced market? Are these just natural market corrections? Is this "everyone does it"?

4. WorldCom was eerily meeting its earnings targets precisely. One analyst did, however, notice that WorldCom was making its targets for several quarters in a row within fractions of cents."When you see that they’re making it by one one-hundredth of a penny you know the odds of that happening twice in a row are very slim. It indicates they’re willing to stretch to make the quarter."

Are investors to blame for relying on the precise numbers and predictions? Shouldn’t they have acted with greater skepticism?

5. Mr. Ebbers’s conduct shows that he still believes he has done nothing wrong. At church services in Mississippi immediately following the revelation of the WorldCom accounting impropriety, Mr. Ebbers arrived as usual to teach his Sunday school class and attend services. He addressed the congregation, saying, "I just want you to know you aren’t going to church with a crook. This has been a strange week at best. … On Tuesday I received a call telling me what was happening at WorldCom. I don’t know what the situation is with all that has been reported. I don’t know what all is going to happen or what mistakes have been made. … No one will find me to have knowingly committed fraud. More than anything else, I hope that my witness for Jesus Christ [will not be jeopardized]."The congregation gave Mr. Ebbers a standing ovation. Mr. Ebbers continues to teach Sunday school each Sunday at 9:15 A. M. and then stays for the ninety-minute service held afterward.

What relationship do religious views and affiliations play in business ethics?

6. What did Scott Sullivan miss in making his analysis to capitalize ordinary expenses? What skills that you learned in Units 1 and 2 might have helped him see the decision and the impact of his decision differently? Why did he not listen to employees and block questions?