I participated in an Ethics and Compliance Officer Association conference in Scottsdale, Arizona last month and attended a fascinating session called The Causes of Corporate Corruption: On the panel, brilliantly moderated by Jeff Benjamin, the ethics officer for Novartis, was David Myers, the former Controller at WorldCom, David Anders, the former Federal prosecutor of WorldCom and Evan Chester a white-color crime attorney. The session lasted 3 hours and was fascinating.

David Myers, who went to jail for his role in the WorldCom scandal, told his side of story. As controller he was first asked by the Scott Sulivan, the CFO, back in October 2000, to enter an amount in the reserve for which there was no validation. He first refused and so did the people who worked for him. He was then approached by Bernie Ebbers, the then Chairman and CEO in a very friendly manner. Mr. Ebbers told him that he sympathized with his situation and that he should not be asking him to do anything that made him uncomfortable. However, he promised, this would be the one and only time such a demand was made, and based on the financial projections of the company, this "error" would be corrected in the next Quarter. David Myers believed him. He also knew that if he refused to make the entry he would, most likely, lose his job and would be unable to meet his financial commitments such as his mortgage payment and college tuition for his children. After much hesitation he entered the amount in the company's reserve. Predictably, the same request was made for the following Quarters until it was discovered in 2002 and the whole scandal broke out.

On June 25, 2002, WorldCom announced financial restatements for 2001 and the first Quarter of 2002 for the amount to $3.85 billion. The stock (which had traded at an all-time high at $62) closed under $1. The company went bankrupt a month later. Scott Sulivan and David Myers each entered a guilty plea. Scott served 5 years and David 1 year and one day. Bernie Ebbers is serving a 25-years sentence.

Once David Myers had made that "one and only" fraudulent entry, it would have been extremely hard for him to refuse to make the second one because he could never justify making the first one.

A slippery slope is, by definition, irreversible.

What lessons can we learn from the WorldCom debacle and how can we identify a situation that could become a slippery slope?

That will be the topic of my next blog.