Citizens Against Government Waste (CAGW) said today’s indictment of former WorldCom CEO Bernie Ebbers confirms why the General Services Administration (GSA) should not have readmitted the company into competitions for new government contracts. Attorney General John Ashcroft announced the charges of securities fraud and conspiracy against Ebbers for his role in an $11 billion accounting scandal. Ex-WorldCom Chief Financial Officer Scott Sullivan today pleaded guilty to fraud charges and could face 25 years in prison.
“The systematic ethical lapses at MCI call for the entire company to face punitive measures, not just the CEO,” CAGW President Tom Schatz said. “If the Bush Administration is serious about its Corporate Fraud Task Force, it should direct the GSA to permanently debar MCI from all government contracts.”
CAGW named the General Services Administration its Porker of the Month in January 2004 for lifting a suspension imposed on MCI in July 2003 for unethical practices. MCI could have faced a three-year suspension and debarment, but GSA determined that the company had strengthened its internal controls and therefore lifted the ban. GSA based its original decision to suspend MCI on reports from former U.S. Attorney General Richard Thornburgh, the Special Investigative Committee of WorldCom’s Board of Directors, a report from the company’s own ethics office, and a June 3, 2003 report by MCI’s outside auditors, KPMG. Thornburg’s third and final report, released in late January, blamed KPMG for creating a corporate structure that could leave the company vulnerable to hundreds of millions of dollars in state tax claims. He also found conflicts-of-interest with WorldCom’s investment banker, Salomon Smith Barney.
“This punishment amounted to nothing more than a slap on the wrist,” Schatz continued. “Other companies, including Enron and Arthur Andersen, who committed similar acts received much stiffer penalties.”
CAGW has been calling for MCI’s debarment from government contracts since November, 2002 on the basis that the Federal Acquisition Regulations required such a conclusion, as well as that the agreements unnecessarily put taxpayer dollars at risk and amounted to a hidden government bailout of the company.
“The company has already proven that it will engage in unacceptable, unethical, and fraudulent behavior in order to obtain contracts,” Schatz continued. “GSA needed to disconnect MCI through debarment and send a proper message to companies that such acts will not be tolerated by the government, much less rewarded with taxpayer dollars.”
Shortly after the suspension went into effect, MCI launched a publicity campaign claiming it had changed its fraudulent ways and also managed to secure seven waivers for government contracts worth $100 million. The company also may have overcharged the government for its services and illegally routed calls through competitors.
“The government is MCI’s largest customer,” Schatz concluded. “It cannot indict MCI’s ex-CEO with one hand while continuing to give the company hundreds of millions of dollars in contracts with the other hand.”
Citizens Against Government Waste is the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.