- The Washington Times - Tuesday, October 8, 2002

In the wake of the Enron and Arthur Andersen scandals, the General Services Administration (GSA) acted swiftly to suspend both companies, and several former officials, from conducting new business with the federal government. These decisions were not only prudent, they protected Americans from unethical companies being paid with hard-earned taxpayer dollars.

It's now time to add a third company to this nefarious list: WorldCom. Even in Washington, where logic is in short supply, it would be absurd if WorldCom escaped the same fate as Enron and Arthur Andersen.

Federal laws and regulations are clear that the government may only award contracts to contractors with a satisfactory record of integrity and business ethics, along with the required organization, accounting and operational controls. The GSA suspended Enron based on evidence that the company had engaged in misconduct and committed internal control irregularities that made it ineligible to receive government contracts. Andersen got kicked out the day after its criminal indictment for allegedly destroying documents related to Enron.

WorldCom has admitted to committing a $7 billion accounting fraud, with recent reports indicating that the final amount could increase by $2 billion. Two of the company's top executives have been arrested and more indictments are expected. Just last week, the former controller pleaded guilty to charges that he manipulated accounting to inflate profits and then tried to cover it up, just like former Enron executives. And now the relationship between WorldCom and the Wall Street firm Salomon Smith Barney is under close scrutiny for alleged sweetheart deals that benefited a few at the risk of the many.

Despite all of this plus ongoing investigations by the Securities and Exchange Commission and the Justice Department the government continues to permit this disgraced former telecom titan to bid on new government contracts and win extensions of current contracts without a competitive process.

Companies wishing to compete for government business must be ethically and financially sound. Most believe that WorldCom will be unable to emerge from Chapter 11 bankruptcy. If it does, it will be only after it sells significant assets to recapitalize the company to keep afloat in some pared down fashion.

With some of its top leadership under criminal indictment, the company under the control of competing creditors, a difficult search for a new CEO, and thousands of employees laid off and hundreds of others fleeing, it certainly is fair to ask whether WorldCom can fulfill any new contractual obligations with a client the size of the U.S. government, and whether it should be allowed to.

Coming on the heels of the Enron, Global Crossing, Qwest and Arthur Andersen scandals, policymakers have rightly expressed outrage over the WorldCom debacle and official Washington has been collectively wringing its hands and promising to do something. Here's something official Washington could do immediately: Stop offering government business to WorldCom.

Upon signing the Corporate Accountability Act earlier this year, President Bush stated: "Now, with a tough new law, we will act against those who have shaken confidence in our markets, using the full authority of government to expose corruption, punish wrongdoers and defend the rights and interests of American workers and investors." When the government continues to pursue new business with WorldCom, it undermines existing law, and the purpose of this new law, and devalues any sort of punishment the government attempts to bestow on fraudulent companies.

To pursue justice while doing considering new business proposals from such a fraudulent and bankrupt company is an injustice to taxpayers. Pull the plug on WorldCom now.


Tom Schatz is president of Citizens Against Government Waste.



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