GSA clears WorldCom for government competition

The General Services Administration has cleared financially troubled WorldCom Inc. to compete for government contracts, in exchange for three years of GSA oversight of its ethics and business practices.

The Jan. 7 decision follows five months of investigation by Joseph A. Neurauter, GSA's suspension and debarment official. Neurauter on July 31 barred WorldCom from competing for new government business because of concerns about weaknesses in the company's accounting controls and business ethics.

These concerns arose after the 2002 discovery of accounting fraud masking massive losses that subsequently led to the company's bankruptcy.

Neurauter found that the company had taken 'vigorous action to reconstitute itself since the discovery of the accounting improprieties.' WorldCom's chief officers and its board of directors are entirely new, and the company has cooperated with GSA's investigations.

In the administrative agreement with WorldCom, Neurauter said, 'GSA has determined that, due to WorldCom's internal reorganization and management changes, WorldCom's remediation of issues raised [by] GSA'and the corrective actions'there is adequate assurance that WorldCom will conduct its future dealings with the government with the high degree of honesty and integrity required'and that debarment is not necessary at this time.'

But because of what Neurauter called the 'unprecedented severity of the earlier wrongdoing,' GSA required a three-year agreement to oversight of the company's efforts to correct internal problems. WorldCom must make written reports every four months through 2004 on its efforts to improve its ethics programs and business practices, and twice a year through January 2007.

WorldCom must also report any changes in senior management, material changes in its business operations and new investigations of the company.

The company last year settled a civil action by the Securities and Exchange Commission alleging violations of security laws. It agreed to pay a $500 million fine and contribute $250 million in stock to compensate shareholders. It still is the subject of investigations by GSA, the Federal Communications Commission, Justice Department and Oklahoma.

The U.S. Bankruptcy Court approved WorldCom's reorganization plan in October, and the company expects to emerge from bankruptcy early this year.

WorldCom CEO Michael Capellas called the GSA decision a sign of confidence in reforms the company has made over the last 18 months.

'We enhanced our corporate ethics program and accounting controls, hired a new chief ethics officer and completed companywide ethics training,' he said.

(Original version posted Jan. 7, 7:23 p.m. Revised Jan. 8)

About the Author

William Jackson is a Maryland-based freelance writer.

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