GSA REVIEWING WHETHER MCI SHOULD RECEIVE GOVT. CONTRACTS

The U.S. govt. has begun a formal review of whether MCI/WorldCom should receive govt. contracts in the wake of one of the largest corporate fraud cases in history, the Senate Govt. Affairs Committee said. The General Services Administration (GSA), which oversees procurement for federal agencies, began a “suspension proceeding” against MCI/WorldCom. The proceeding comes as the Govt. Affairs Committee continues to investigate the company’s worthiness to receive federal contracts. “We need to make sure that the federal government is diligently reviewing the companies with whom it does business,” said Committee Chmn. Collins (R-Me.). MCI has more than $770 million in govt. contracts.

The GSA said the formal review was begun in early June upon a recommendation by the GSA’s Inspector Gen., which automatically initiated the action. But a Govt. Affairs Committee spokeswoman said that although such a recommendation was made, the committee wasn’t notified until Fri. that it resulted in a review. Collins has expressed concern that GSA’s review of MCI (which formally changed its name from WorldCom) hasn’t been thorough and was based primarily on presentations made by MCI. She said the proceeding “should have started months ago.” A committee spokeswoman said it was gathering information from the Postal Service, Veterans Affairs Dept., State Dept., Commerce Dept. and Defense Dept. for a general review of govt. contracting policy.

GSA responded to Collins’ questions in late May with a memo from the general counsel to GSA Administrator Stephen Perry that detailed its review of MCI and said the agency had not determined whether MCI should be suspended. The memo said GSA had increased monitoring of MCI after the WorldCom/MCI financial improprieties emerged in June 2002. GSA said it had suspended former WorldCom officials from conducting business with GSA, including former CFO Scott Sullivan. “We've been monitoring MCI for quite some time,” a GSA spokeswoman said Mon. The SEC already has fined WorldCom/MCI $500 million for the financial misstatements.

An MCI spokeswoman said: “For more than 15 years, MCI has provided outstanding service to the federal government. Last fall, the GSA conducted a detailed and thorough investigation that concluded that MCI continued to be a responsible government contractor. The company has made many additional positive changes since last fall that should only reinforce GSA’s earlier determination of responsibility. We welcome the opportunity to share with GSA, and anyone else interested, all of the positive changes that have taken place in our company.”

Both Citizens Against Govt. Waste (CAGW) and the National Legal & Policy Center (NLPC) said they were encouraged by the investigation. “With the GSA investigation, taxpayers will be closer to learning whether the federal government’s hidden bailout of MCI/WorldCom is coming to an end. Based on consistent applications of federal procurement rules, GSA should unplug MCI/WorldCom from government contracts,” CAGW Pres. Thomas Schatz said. He said GSA had taken swift action to bar or suspend Enron and Arthur Andersen. He compared the $500 million fine with its more than $770 million in contracts. “It is clear that a bipartisan wave of congressional outrage is building and that federal agencies are finally being forced to review their policies for awarding contracts to a company that committed the most egregious corporate fraud in U.S. history,” NLPC Chmn. Ken Boehm said.