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Chapter 2 Business Ethics and Social Responsibility
“Mommy, Why Do You Have to Go to Jail?”
The one question Betty Vinson would prefer to avoid is “Mommy, why do you have to go to jail?”This case is based on Susan Pullman, “How Following Orders Can Harm Your Career,” Wall Street Journal, June 23, 2003, CareerJournal.com, http://www.careerjournal.com/myc/killers/20030630-pulliam.html (accessed April 24, 2006). Vinson graduated with an accounting degree from Mississippi State and married her college sweetheart. After a series of jobs at small banks, she landed a midlevel accounting job at WorldCom, at the time still a small long-distance provider. Sparked by the telecom boom, however, WorldCom soon became a darling of Wall Street, and its stock price soared. Now working for a wildly successful company, Vinson rounded out her life by reading legal thrillers and watching her twelve-year-old daughter play soccer.
Figure 2.1
WorldCom Inc.’s former director of management, Betty Vinson, leaves Federal Court after pleading guilty to securities fraud October 10, 2002, in New York City.
Photo by Adam Rountree/Getty Images
Her moment of truth came in mid-2000, when company executives learned that profits had plummeted. They asked Vinson to make some accounting adjustments to boost income by $828 million. She knew that the scheme was unethical (at the very least) but gave in and made the adjustments. Almost immediately, she felt guilty and told her boss that she was quitting. When news of her decision came to the attention of CEO Bernard Ebbers and CFO Scott Sullivan, they hastened to assure Vinson that she’d never be asked to cook any more books. Sullivan explained it this way: “We have planes in the air. Let’s get the planes landed. Once they’ve landed, if you still want to leave, then leave. But not while the planes are in the air.”Susan Pullman, “How Following Orders Can Harm Your Career,” Wall Street Journal, June 23, 2003, CareerJournal.com, http://www.careerjournal.com/myc/killers/20030630-pulliam.html (accessed April 24, 2006). Besides, she’d done nothing illegal, and if anyone asked, he’d take full responsibility. So Vinson decided to stay. After all, Sullivan was one of the top CFOs in the country; at age thirty-seven, he was already making $19 million a year.Amanda Ripley, “The Night Detective,” Time, December 22, 2002, http://www.time.com/time/personoftheyear/2002 (accessed April 24, 2006). Who was she to question his judgment?Jeff Clabaugh, “WorldCom’s Betty Vinson Gets 5 Months in Jail,” Washington Business Journal, August 5, 2005, Albuquerque Bizjournals.com, http://albuquerque.bizjournals.com/washington/stories/2005/08/01/daily51.html (accessed April 24, 2006).
Six months later, Ebbers and Sullivan needed another adjustment—this time for $771 million. This scheme was even more unethical than the first: It entailed forging dates to hide the adjustment. Pretty soon, Vinson was making adjustments on a quarterly basis—first for $560 million, then for $743 million, and yet again for $941 million. Eventually, Vinson had juggled almost $4 billion, and before long, the stress started to get to her: She had trouble sleeping, lost weight, looked terrible, and withdrew from people at work. But when she got a promotion and a $30,000 raise, she decided to hang in.
By spring 2002, however, it was obvious that adjusting the books was business as usual at WorldCom. Vinson finally decided that it was time to move on, but, unfortunately, an internal auditor had already put two and two together and blown the whistle. The Securities and Exchange Commission charged WorldCom with fraud amounting to $11 billion—the largest in U.S. history. Seeing herself as a valuable witness, Vinson was eager to tell what she knew. The government, however, regarded her as more than a mere witness. When she was named a co-conspirator, she agreed to cooperate fully and pleaded guilty to criminal conspiracy and securities fraud. And that’s why Betty Vinson will spend five months in jail. But she won’t be the only one doing time: Scott Sullivan—who claims he’s innocent—will be in jail for five years, and Bernie Ebbers—who swears he’s innocent also—will be locked up for twenty-five years.Scott Reeves, “Lies, Damned Lies and Scott Sullivan,” Forbes.com, February 17, 2005, http://www.forbes.com/business/2005/02/17/cx_sr_0217ebbers.html (accessed April 24, 2006); David A. Andelman, “Scott Sullivan Gets Slap on the Wrist—WorldCom Rate Race,” Forbes.com, August 12, 2005, http://www.mindfully.org/Industry/2005/Sullivan-WorldCom-Rat12aug05.htm (accessed April 24, 2006).
So where did Betty Vinson, mild-mannered midlevel executive and mother, go wrong? How did she manage to get involved in a scheme that not only bilked investors out of billions but also cost seventeen thousand people their jobs?Susan Pullman, “How Following Orders Can Harm Your Career,” Wall Street Journal, June 23, 2003, CareerJournal.com, http://www.careerjournal.com/myc/killers/20030630-pulliam.html (accessed April 24, 2006). Ultimately, of course, we can only guess. Maybe she couldn’t say no to her bosses; maybe she believed that they’d take full responsibility for her accounting “adjustments.” Possibly she was afraid of losing her job. Perhaps she didn’t fully understand the ramifications of what she was doing. What we do know is that she disgraced herself and headed for jail.“World-Class Scandal at WorldCom,” CBSNews.com, June 26, 2002, http://www.cbsnews.com/stories/2002/06/26/national/main513473.shtml (accessed April 24, 2006).