GSA Defends MCI Contracts

The General Services Administration (GSA) says there is no evidence that bankrupt and scandal-ridden MCI shouldn’t be awarded government contracts. Despite its bankruptcy, the largest in U.S. history, and admitted $9 billion accounting scandal, the former WorldCom has continued to land lucrative contracts to provide telecom services to the government.

Just last month, MCI agreed to pay a $500 million fine imposed by the Securities and Exchange Commission (SEC) in settlement of charges that the company defrauded its investors. It was the largest fine ever imposed by the SEC on a non-Wall Street company.

On May 16, Senate Governmental Affairs Chairman Susan Collins (R.-ME) wrote a letter to GSA Administrator Stephen A. Perry asking for a detailed report on the agency’s evaluation of MCI WorldCom’s viability as a government contractor. Enron and Arthur Anderson, two other scandal plagued companies, have been banned by the GSA from doing any future business with the government.

Perry replied on May 30, sending a memorandum written by Raymond J. McKenna, the GSA’s general counsel. The memorandum states, “In order for a federal contractor to be suspended there must first be a showing of ‘adequate evidence’ of infractions that affect the present responsibility of the firm or individual to conduct future business with the government.”

McKenna adds, “GSA has not determined that MCI WorldCom should be suspended or debarred.”

Collins expressed dissatisfaction with the response.

“The GSA appears to have focused on WorldCom’s capacity to perform the contract without consideration of the company’s business ethics and integrity, both of which are integral in determining whether a company is a ‘responsible’ government contractor,” Collins said.

MCI is one of the top ten government contractors, billing taxpayers approximately $800 million a year for a variety of telecom services. The company recently added to its government business by winning a $45 million contract to build a cell phone system in Iraq and a $7 million contract to provide high-speed satellite data services for weather forecasting.

“GSA’s evaluation leaves many unanswered questions,” Collins said Tuesday. “Rather than performing its own, in-depth inquiry into the company’s alleged accounting fraud, which the SEC noted last year was ‘of unprecedented magnitude,’ GSA appears to have relied very heavily upon WorldCom representations in determining the company’s continued status as a federal contractor and in extending existing contracts.”

Collins also said the GSA appeared to have ignored outside sources of information, such as the preliminary investigative report on MCI WorldCom by former U.S. Attorney General Richard Thornburgh.

Collins said her committee will continue its examination of GSA’s activities regarding MCI WorldCom.

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