During a meeting with the auditors, corporate finance director Sanjeev Sethi explained that differing amounts in two capital spending expenditures related to 'prepaid capacity'. No one in the room had ever heard that term before. When pressed for an explanation, Sethi said that he did not know what the term meant, even though his division approved capital spending requests. He referred the auditors to corporate controller David Myers. Suspicious, Cooper asked Mark Abide, head of property accounting, about the term. Abide was not familiar with it either, even though he had made several entries about 'prepaid capacity' in WorldCom's computerized accounting system.
Cooper and Smith asked senior associate Eugene Morse, one of the "techies" on the internal audit team, to peruse the accounting system for any references to 'prepaid capacity'. Morse was eventually able to find one and trace it through the system. However, the amounts were bouncing between accounts in an unusual manner, resulting in a large round amount moving from WorldCom's income statement to its balance sheet.
In 2002 Cooper asked Morse to see if there was another 'prepaid capacity' entry that moved around in similar fashion. Morse went to work, but pulled so much data that he frequently clogged up the accounting servers. Eventually, he and the rest of the team began working at night. Finally, on June 10, Morse found more entries about 'prepaid capacity'; large amounts had been transferred from the income statement to the balance sheet from the third quarter of 2001 to the first quarter of 2002.
At the time, this was the largest incident of accounting fraud in U.S. history.