HOUSE APPROPRIATORS BACK OFF MCI CONTRACTING BAN

Instead of barring the govt. from doing business with MCI, a House Appropriations Committee amendment adopted Thurs. would require the General Services Administration (GSA) to issue a report on the suitability of MCI to receive govt. contracts. Rep. Sweeney (R-N.Y.) had said he would propose an amendment to the Transportation & Treasury appropriations bill that would have barred the GSA from granting MCI govt. contracts. However, industry sources said the Administration stepped in on behalf of MCI before the markup to help reach a compromise, although one Capitol Hill source disagreed that the White House was involved.

The amendment, approved as report language, would require the GSA to complete its investigation of MCI by Aug. 30. It comes as the Senate Govt. Affairs Committee conducts its own investigation of GSA and its contracts with MCI. The Sweeney amendment said GSA’s report on MCI “should comment specifically on the GSA stated debarment and suspension regulations that require contractors to have a credible ‘record of business integrity and business ethics, necessary organization, accounting and operational controls.'”

The report would coincide with the Senate Govt. Affairs Committee investigation, which was waiting on a similar report from the GSA. After the Senate Govt. Affairs Committee began its investigation, GSA said it would conduct a “suspension proceeding” on MCI to determine whether the govt. should continue to award it contracts (CD July 1 p1). MCI has nearly $770 million in federal contracts. A Govt. Affairs Committee spokeswoman said the panel was collecting information on such contracts with GSA, Defense Dept., Postal Service, Veterans Affairs, State Dept., Commerce Dept., Social Security Administration and FAA.

The appropriations report language also would instruct the General Accounting Office (GAO) to conduct a detailed study of GSA’s treatment of MCI/WorldCom. The report would have to explain why GSA, the govt. agency that oversees most federal contracts, didn’t suspend MCI/WorldCom after revelations that WorldCom had misstated billions in profits. The amendment also said the GAO report should “consider what precedent GSA’s treatment of WorldCom has set and what impact it has had on the larger telecommunications industry.” The report language cited testimony Tues. in the Senate where both KPMG and Bankruptcy Examiner Richard Thornburgh (former U.S. Attorney Gen.) said MCI still didn’t have adequate internal controls in place.

A spokesman for Sweeney said the full House wasn’t scheduled to consider the Transportation & Treasury appropriations bill until Sept. when Congress returns from recess. Industry sources said the timing of the measure left open options for the House, which could decide to attach a tougher measure to the bill should members not be satisfied with the GSA report. Sweeney’s spokesman said the proposed compromise on the amendment still met many of his goals and said the report would be more effective at getting the GSA to report to the Appropriations Committee specific criteria on documenting the integrity of MCI and other companies. The spokesman said the report would provide congressional oversight of the GSA.

Industry sources said it appeared Sweeney had enough votes to win passage of an amendment that would ban MCI from GSA contracts. However, it wouldn’t have banned the Defense Dept.(DoD) from contracting with MCI. Industry sources said the White House became involved and lobbied for a less controversial amendment. They said they didn’t know why the White House actively lobbied against the original Sweeney amendment, but one said MCI had significant support within the DoD.

The Appropriations Committee spokesman said he wasn’t aware of any White House involvement in the amendment. “I don’t think that’s true,” he said. He said Committee Chmn. Young (R-Fla.) urged Sweeney to introduce an amendment that was tough on corporate malfeasance but that wouldn’t create too much controversy. “They chose to work in a collaborative way,” the spokesman said.

Sweeney has been an outspoken critic of MCI/WorldCom. “WorldCom perpetuated the largest corporate fraud in the nation’s history,” he said. “They purposely overestimated their profits by $11 billion and destroyed the life savings of thousands of Americans -- and yet GSA took no action against them. This action demonstrates Congress’s willingness to condemn corporate malfeasance while retaining the right to provide strict oversight of federal contracting.”

MCI said: “MCI will continue its ongoing commitment to work constructively with GSA to demonstrate that the company continues to be a responsible government contractor and is as strong as ever.”

The NAACP said it would call on Congress to amend Chapter 11 of the bankruptcy law because bankruptcies by WorldCom, Global Crossing and Enron had hurt minorities disproportionately.