- The Washington Times - Friday, June 13, 2003

ASSOCIATED PRESS

The government is considering suspending its business with WorldCom Inc., whose $11 billion accounting scandal last year led to the largest bankruptcy filing in U.S. history.

Worldcom’s government contracts are valued at more than $1 billion each year. Critics and competitors say the government has been too lenient with the company by continuing to award it work, including hiring WorldCom to build a wireless phone network in Iraq.

The inspector general of the General Services Administration, the government’s contracting agency, has referred a review of WorldCom’s federal business to an official in charge of suspensions, GSA spokeswoman Mary Alice Johnson said yesterday.

“The process of determining whether to suspend or debar WorldCom is active and ongoing,” Miss Johnson said.

Under federal rules, a suspension of as long as a year would temporarily disqualify WorldCom from doing business with the government while an investigation is under way. Debarment, a decision based on more conclusive evidence of wrongdoing, can exclude the company from government business for a period of typically not longer than three years.

A suspension or debarment would affect renewed or new contracts, Miss Johnson said.

WorldCom spokeswoman Natasha Haubold said that questioning WorldCom’s government business has been prompted by “competitors who would much rather see MCI dissolved than to compete with us in the marketplace.”

WorldCom hopes to emerge from Chapter 11 protection in the fall under the name of its MCI long-distance unit.

After WorldCom’s accounting scandal erupted, the GSA reconsidered WorldCom’s status and determined that it was still a “responsible contractor.”

Since then, Miss Haubold said, WorldCom has taken further steps to put the scandal behind it, including hiring a new chairman and agreeing last month to a $500 million settlement with the Securities and Exchange Commission.

Last week, Sen. Susan Collins, Maine Republican and chairman of the Senate Governmental Affairs Committee, asked the GSA to investigate WorldCom’s financial and ethical dealings to determine whether the company should be eligible to bid on or receive government contracts. She cited a GSA inspector general’s report recommending that the agency begin a formal suspension proceeding.

She said she regrets that “it took so long and so much effort to prod GSA to begin a process that should have occurred nearly a year ago.”

WorldCom critics say that not penalizing the company would be inconsistent since the government last year barred energy company Enron Corp. and the Arthur Andersen LLP accounting firm from receiving contracts after their corporate-fraud scandals emerged.

WorldCom, once among the fastest-growing and most aggressive players in the telecom and Internet boom, is accused of falsifying balance sheets to hide expenses and inflate earnings. Its collapse and bankruptcy wiped out as much as $200 billion in shareholder wealth.

The SEC settlement of civil fraud charges requires WorldCom to put the $500 million into a fund for investors who were victimized by the company, though the exact process has yet to be determined.

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