WASHINGTON—Senator Susan Collins (R-ME), chairman of the Governmental Affairs Committee, announced today that the committee is opening an investigation of whether WorldCom, Inc., which has been accused of fraudulently bolstering its bottom line by at least $9 billion, should be allowed to compete for federal contracts.
In a May 16 letter to Stephen Perry, Administrator of the General Services Administration (GSA), Collins questioned the propriety of the extension and award of government contracts to WorldCom months after the alleged fraud was disclosed. Four former WorldCom employees have pleaded guilty to criminal charges, and earlier this week, WorldCom, which now does business as MCI, agreed to pay a $500 million fine imposed by the Securities and Exchange Commission to settle charges that the company defrauded its investors.
“The GSA plays a key role in procuring goods and services for federal agencies. It is empowered to investigate and suspend or disbar unsuitable contractors,” Collins said. “But despite evidence that WorldCom committed serious investor fraud, the GSA has allowed WorldCom continued access to lucrative government contracts without providing an explanation of why the government should continue to do business with this corporation.”
Under Federal Acquisition Regulations, GSA is empowered to suspend companies from contracting with the federal government when a company’s offense is of such a serious nature that it affects the “present responsibility” of the contractor. The GSA exercised that authority in suspending Enron from future government contracts within months after the company declared bankruptcy.
“Contractors that do business with the federal government must demonstrate integrity as well as the ability to do the work,” Collins said. “The evidence of systematic fraud by WorldCom executives raises serious questions about the eligibility of this company to secure federal contracts.”
Collins has asked the GSA to provide the committee with written documentation on the agency’s investigation, analysis and oversight of WorldCom by Friday, May 30, 2003. Collins’ letter is posted on the committee’s website at http://govt-aff.senate.gov