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Ethical Lapses, Business Practices Cost MCI/WorldCom Federal Contracts
In the wake of congressional testimony by CWA President Morton Bahr on MCI/WorldCom's fitness to do business, the General Services Administration has suspended the company from receiving new federal contracts.
The government has been MCI/WorldCom's largest customer, providing $500 million to the company in 2002. Industry analysts say that amount could rise to as much as $800 million this year.
The GSA's action immediately stops government agencies from entering into new contracts with MCI/WorldCom for up to three years. The company has 30 days to challenge the decision.
"Finally, MCI/WorldCom is being held responsible for the irreparable harm it has caused to telecommunications companies that play by the rules and, by extension, to tens of thousands of our members who have lost their jobs due to layoffs," Bahr said.
GSA Administrator Stephen Perry cited a report by his agency's inspector general that determined that the company is not "presently responsible" and lacks necessary internal controls and business ethics. "It is important that all companies and individuals doing business with the federal government be ethical and responsible," he said.
The Washington Post reported the company also could lose contracts from state and local governments, which often follow the federal government's lead.
Righteous Indignation
Both Bahr and Verizon Executive Vice President William Barr called for a Justice Department probe and prosecution of MCI/WorldCom when they testified at an oversight hearing July 20 before the Senate Judiciary Committee.
They also challenged the adequacy of a $750 million fine MCI/WorldCom agreed to pay to settle an $11 billion fraud case brought by the Securities and Exchange Commission. U.S. Bankruptcy Judge Arthur Gonzales approved the settlement on Aug. 6. A hearing on whether to allow the company to emerge from bankruptcy will take place Sept. 8.
"MCI/WorldCom's lies and false financial reports destabilized the entire telecommunications industry. Tens of thousands of employees - not only at WorldCom but throughout the telecom sector - lost their jobs and retirement savings," Bahr told the committee.
"Yet, MCI/WorldCom is positioned to emerge from bankruptcy with the strongest balance sheet in the telecommunications industry. This will cause further destabilization and job loss in the struggling telecom sector, and send a message to corporate America that crime pays," he said.
Bahr submitted 27 pages of documents, including letters from numerous CWA local presidents representing AT&T employees who lost their jobs when their company laid off 18,000 non-management workers to compete with MCI/WorldCom.
"Other CWA-represented telecom companies eliminated an additional 55,000 frontline jobs. Altogether, more than 172,000 jobs have been cut in the telecom sector in the past two years," Bahr said.
He pointed out that while the GSA cancelled all contracting with accounting firm Arthur Anderson and energy giant Enron in the wake of those corporate scandals, the government has rewarded MCI/WorldCom with a $45 million contract to build a wireless network in Iraq.
Barr, general counsel for Verizon and a former U.S. attorney general, joined Bahr in calling for criminal prosecution of WorldCom. "Honest competition is good for shareholders, for employees, and for consumers," Barr said. "Dishonest competition - competition where the government places its thumb on the scale by giving affirmative advantages to corporate criminals - kills investment, kills jobs, and kills economic growth."
The government has been MCI/WorldCom's largest customer, providing $500 million to the company in 2002. Industry analysts say that amount could rise to as much as $800 million this year.
The GSA's action immediately stops government agencies from entering into new contracts with MCI/WorldCom for up to three years. The company has 30 days to challenge the decision.
"Finally, MCI/WorldCom is being held responsible for the irreparable harm it has caused to telecommunications companies that play by the rules and, by extension, to tens of thousands of our members who have lost their jobs due to layoffs," Bahr said.
GSA Administrator Stephen Perry cited a report by his agency's inspector general that determined that the company is not "presently responsible" and lacks necessary internal controls and business ethics. "It is important that all companies and individuals doing business with the federal government be ethical and responsible," he said.
The Washington Post reported the company also could lose contracts from state and local governments, which often follow the federal government's lead.
Righteous Indignation
Both Bahr and Verizon Executive Vice President William Barr called for a Justice Department probe and prosecution of MCI/WorldCom when they testified at an oversight hearing July 20 before the Senate Judiciary Committee.
They also challenged the adequacy of a $750 million fine MCI/WorldCom agreed to pay to settle an $11 billion fraud case brought by the Securities and Exchange Commission. U.S. Bankruptcy Judge Arthur Gonzales approved the settlement on Aug. 6. A hearing on whether to allow the company to emerge from bankruptcy will take place Sept. 8.
"MCI/WorldCom's lies and false financial reports destabilized the entire telecommunications industry. Tens of thousands of employees - not only at WorldCom but throughout the telecom sector - lost their jobs and retirement savings," Bahr told the committee.
"Yet, MCI/WorldCom is positioned to emerge from bankruptcy with the strongest balance sheet in the telecommunications industry. This will cause further destabilization and job loss in the struggling telecom sector, and send a message to corporate America that crime pays," he said.
Bahr submitted 27 pages of documents, including letters from numerous CWA local presidents representing AT&T employees who lost their jobs when their company laid off 18,000 non-management workers to compete with MCI/WorldCom.
"Other CWA-represented telecom companies eliminated an additional 55,000 frontline jobs. Altogether, more than 172,000 jobs have been cut in the telecom sector in the past two years," Bahr said.
He pointed out that while the GSA cancelled all contracting with accounting firm Arthur Anderson and energy giant Enron in the wake of those corporate scandals, the government has rewarded MCI/WorldCom with a $45 million contract to build a wireless network in Iraq.
Barr, general counsel for Verizon and a former U.S. attorney general, joined Bahr in calling for criminal prosecution of WorldCom. "Honest competition is good for shareholders, for employees, and for consumers," Barr said. "Dishonest competition - competition where the government places its thumb on the scale by giving affirmative advantages to corporate criminals - kills investment, kills jobs, and kills economic growth."