E-mail a friendCynthia Cooper
airdate April 15, 2008
Known for her role in uncovering corporate fraud at WorldCom, Cynthia Cooper was named one of three "People of the Year" by Time magazine in '02. She was previously the company's VP of internal audit, and her whistle-blowing resulted in the imprisonment of five execs, including the CEO. Now helming her own firm, she offers corporate ethics advice to corporations and business schools. Cooper tells the tale of the largest corporate fraud in history in her book, Extraordinary Circumstances.
Former WorldCom VP describes the personal toll of being a whistle-blower. Full interview. (11:45)
Cynthia Cooper
Tavis: Cynthia Cooper was a former vice president at the telecom giant WorldCom who helped uncover what became the largest financial fraud in U.S. corporate history. The new book about her ordeal at WorldCom is called "Extraordinary Circumstances: The Journey of a Corporate Whistleblower." Cynthia Cooper, nice to have you on the program.
Cynthia Cooper: Thank you, Tavis.
Tavis: It's nice to see you.
Cooper: Pleasure to be here, thank you.
Tavis: The pleasure's mine. Let me start by asking, was it worth it?
Cooper: Well, it was certainly very difficult, of course. A lot of people suffered. As you know, millions of people lost all or portions of their retirement, and I watched as thousands and thousands of my coworkers were laid off in wave after wave. But I spend a lot of time talking with students, college students and high school students, and I often tell them that my team and I really found ourselves standing at this crossroads where there was only one right path to take.
And I would take that path again, but that doing the right thing, of course, as you know, doesn't mean there will be no cost, no price to pay, often to other innocent people, as well as your own family and yourself.
Tavis: That's shorthand, when you say it was the only right path to take. What was that right path, in detail?
Cooper: Well, that right path was in this case my team and I identified some very suspicious entries and we continued to pursue those entries until we found out, in fact, that in the end, unfortunately, there was no support for those entries.
Tavis: It's been a few years now. How big was this? I referred to it as the biggest fraud. What are the numbers here?
Cooper: Well, the restatement grew to some $11 billion, and of course as you know came to be known as the largest fraud in corporate history and then WorldCom the largest bankruptcy in corporate history as well.
Tavis: Take me back to when you and your team discovered that something was foul here, something was awry. How did that discovery happen and when did you get the sense that this wasn't something small, this was something significant?
Cooper: Well, I was the vice president of the internal audit department at WorldCom, and WorldCom was the only Fortune 500 company headquartered in my state in Mississippi. I was over the internal audit department. And we began an audit in which we identified some entries that initially we were simply curious about. And as we continued to pursue those entries, our suspicions grew.
For example, the controller sent me an email telling me we were wasting our time auditing this particular area of the company. The CFO who I reported to administratively called me in and told me - asked me to delay my audit until a later date.
And so as we continued to work at night and behind closed doors, we were actually downloading so many entries from the accounting system that we were starting to crash the servers at WorldCom. Our suspicions began to grow and ultimately I went to the accounting department and we went door to door, working our way up the chain of command, starting with some of the persons who actually made the entries in the systems, asking about these entries until we determined that in fact there was absolutely no support for these entries and management had simply gone into the accounting system and taken huge amounts.
They were moving, Tavis, something like $700 million a quarter from the income statement to the balance sheet, what is known as the balance sheet, basically making the company look to be more profitable than in fact it was.
Tavis: I would think - $700 million a quarter - I mean, $700 million, period, is a lot of money. $700 million a quarter is a lot more money.
Cooper: Huge amounts.
Tavis: And yet - you say huge amounts, and you're right. And yet, as huge as those amounts are, Cynthia, it also seems to me that because the dollar figures in these multinationals are so huge that it seems easier - easier than not - to get away with what WorldCom did.
Cooper: Right. If you look at WorldCom and Enron and Tyco, all these big corporate scandals, most of these financial statement frauds go on for many years before they're detected. And one of the reasons is because they often involve collusion, employees working together at the very highest levels of the company, all the way up, in many cases, to the CEO level.
Tavis: How do you - I don't mean to be naïve in asking this question, but when you say collusion, you got a bunch of folk or a handful of folk working together on this. It's one thing for one person or two people to hide something, but collusion - it's just mind-boggling to me that something could go on for this long with that many people connected to it and the story not break before it broke.
Cooper: Yeah, in the case of WorldCom, five people actually pled guilty to fraud. Of course, Bernie Ebbers was found guilty in federal court and sentenced to 25 years in prison. But when you have people who are working together, unfortunately they can often bypass the basic internal controls within a company that are designed to prevent financial statement frauds, and the people who perpetrated this fraud, you'll read in "Extraordinary Circumstances," that they became complicit for a number of reasons, I think.
At the very top of the company you had some executives where pride came into play. These guys were used to winning, they were used to being praised on Wall Street, and didn't want the company to fail on their watch. With some of the midlevel managers, you'll read that they became complicit because of pressure from superiors, and they were afraid of losing their jobs and having no way to support their families.
And then I think a misguided loyalty was also another reason that people became complicit with this fraud.
Tavis: What about money itself, since we're talking about that kind of money?
Cooper: Yeah, absolutely, greed certainly comes into play with all of these frauds and now, you know, it seems like every day we open the paper and see new scandals, now of course with the subprime crisis. And in the late '90s, executives were loaded up with stock options like never before, so there was certainly an incentive from a financial perspective to commit these frauds.
Tavis: You talk in the book, and I wanted you to kind of unpack this for us now, the personal toll that it takes on the whistle-blower. So it's easy, after the fact, for "Time" magazine to put you on the cover and celebrate you as one of the persons of the year, you and your team. I suspect, though, much more difficult, as you talk in the book, about making the decisions to do what you did.
And I'm trying, again, to juxtapose you saying on the one hand that you and your team realized there was only one right thing to do. I'm trying to square that with the reality that doing that one right thing was going to get you in a whole lot of trouble.
Cooper: Right. Certainly I realized that there was a good chance that I might lose my job and begin taking items from my office home at night, and whistle-blowers, as you say, it isn't often a very negative story. I talk with whistle-blowers across the country, and they all tell me the same thing. Most whistle-blowers are gone from their jobs within a year; they're often isolated in the workplace.
And of course imagine, you know, in my case I was an average citizen, very comfortable living a private life, and all of a sudden you step over that invisible line that you don't even know exists and suddenly you're thrust into the public spotlight. I can tell you I was completely unprepared for that. I didn't even like to get up and speak in front of my staff, and all of a sudden the press is all over my neighborhood.
They're all over my parents' neighborhood, going door to door, asking people what they know about me. FBI agents show up at my office door and come in and spread tools across my desk and take out my hard drive and download all of my voicemail messages, and I'm being told that I'm going to be subpoenaed before Congress.
And I actually was subpoenaed to testify in federal court. At Bernie Ebbers' trial I was the first witness subpoenaed by the defense in that case. So this was a world that was completely foreign to me.
Tavis: How does - I wanted to ask you this; since you went there, we'll just go there now. How does one, after doing all this work, face the CEO of the company? You've uncovered all of this but now you're like face to face with the guy who was your boss, your ultimate boss, and that face to face feels like what?
Cooper: Yeah, well, there's nothing that can fully prepare you, I think, to walk into a federal court where you've got the judge to your right, the jury to your left, and of course the defendant, Bernie Ebbers, sitting right in front of me. But I decided that the jury basically had this man's life in their hands and that I would look at the jury, tell the jury my story, and that I had an obligation to the justice system to go in and serve as a witness, and so that's what I did. I prepared myself to do that.
Tavis: So you cross that line, you end up in all these places - on the cover of "Time" magazine, cover of your book, on PBS and everywhere else, and that feels like what for you?
Cooper: Well certainly it's very surreal in many ways, but I've written this book and actually spent over three years writing this book because I felt such a passion for sharing this story, primarily because I think there are such valuable lessons that can be gleaned, not only business lessons: what can we do to prevent these scandals going forward - but personal lessons: what can we take from this story?
And WorldCom really is just the backdrop. Next month, next year, the names will change, the corporations will change, but the ethical dilemmas will continue. And we all face these ethical dilemmas every day and I'm convinced that character's not forged at the crossroads of some major event but that it's built decision by decision by decision throughout our lives.
And I've actually devoted the epilogue to 10 steps that young people can take to hopefully make sure that they recognize an ethical dilemma. Because I think oftentimes, we walk right through these dilemmas without fully recognizing them and hopefully stop, step back, and think it through to make the right decisions.
Tavis: To your point now on the epilogue, I earmarked this - dog-eared it, rather. (Unintelligible) earmarks. We're talking about money and the wrong word came out. No, not an earmark - talking about Congress and money, anyway. I digress.
I dog-eared the page, not earmarked the page, to ask you about a couple of these things that you have in this epilogue about the advice you give to people with regard to being a whistle-blower. One of them is to ask yourself, "Would I be comfortable with my decision landing on the front page of a newspaper?" "Would I be okay with my parents, professors, and mentors knowing about my choice?" "What are the potential consequences of my actions?" At what point did you go through that phase of answering those questions?
Cooper: Well, people often ask me "What really helped you to kind of push forward in the face of your fear?" and I wish I could stand here and tell you that, you know, I was strong, a pillar of strength throughout this process. But there were times, literally, when I was scared to death, when my hands were shaking and my heart was pounding. And I can remember, my mother was always trying to teach us lessons, to my brother and me as we were growing up.
And she would say, "Think about the consequences of your actions," but she would also say, "Don't ever allow yourself to be intimidated," if we came home from school and someone was trying to bully or pressure us. And I think that was ingrained in me from a very young age and as much as anything, I think that has helped me to find my courage at times when I needed it most.
A man wrote me a letter a couple of years ago and he said, "My wife and I try to teach our children that courage is not without fear, but courage is acting in the face of fear." And I think that that is so true. So often when we come to those tough dilemmas I think for the most part many of those decisions have been made for us in terms of the small decisions that we've made throughout our lives.
Tavis: Finally - again, I don't mean to be naïve in asking this question, either. Given that these stories have come out so much over the last few years and people have been busted and Bernie Ebbers sitting in jail as we speak, do you think that this stuff will ever - I don't want to say cease - will slow down when people realize that they can get caught and go to jail for a long time?
Cooper: Well I think we'll always continue to have scandals and frauds because of human nature and temptation, and that's why it's so important, I think, to start teaching ethics in school. Not only in college, but I think we need to incorporate it in high school, junior high, elementary school so that we can teach young people to draw those clear ethical boundaries early in life and teach them to stand up to that pressure that they will certainly come to in the business world.
So yes, I think with the increased regulation that we have seen - Sarbanes-Oxley, I think a lot of positives came out of Sarbanes-Oxley - that we can help to minimize these frauds. But fraud will always be with us.
Tavis: "Extraordinary Circumstances: The Journey of a Corporate Whistleblower," written by the former vice president of WorldCom, Cynthia Cooper. Thanks for your work, nice to have you on.
Cooper: Thank you so much, Tavis.
Tavis: It's my pleasure.
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