Senator questions MCI’s status as gov’t contractor

The chairwoman of the U.S. Senate Governmental Affairs Committee, which has jurisdiction over government contracts, has questioned the decision by the U.S. General Services Administration (GSA) to restore the ability of MCI to receive federal government contracts.

On Wednesday, the GSA announced it was restoring MCI’s government contracting status after a five-month period in which the telecommunications giant was barred from government contracts. The government restriction on contracts came in the wake of revelations, which first came to light in 2002, of one of the biggest accounting frauds in U.S. corporate history.

But Senator Susan Collins, a frequent MCI critic, questioned in a statement whether MCI should be reinstated, although she welcomed the three-year agreement that MCI must follow.

“I question, however, whether GSA made the right decision in reinstating MCI when allegations involving the company remain under investigation by federal authorities,” said Collins, a Maine Republican. “Until those issues are resolved, it is difficult to assess MCI’s suitability for federal contracts.”

Under federal law, companies doing business with the federal government must uphold satisfactory ethical standards, Collins said in here statement. “We must ensure that taxpayers’ dollars are well spent,” she added.

MCI, still officially known as WorldCom Inc., was barred from U.S. government contracts in late July, after the GSA determined the company had “unrepaired weaknesses” in its ethics program and accounting controls. MCI filed for bankruptcy in July 2002, about a month after the company disclosed that a group of former employees had altered accounting records to conceal losses and inflate earnings.

GSA suspension and debarment official Joseph Neurauter notified MCI Chief Executive Officer Michael Capellas of MCI’s resurrected contracting status in a letter Wednesday. MCI has a new chief ethics officer, has reorganized its financial organization and has put improved systems of controls in place, Neurauter noted in his letter.

Capellas welcomed the news in a statement, noting that the company has completed companywide ethics training. “Over the past months, MCI and its employees have taken extensive steps to ensure the company operates with the utmost integrity,” Capellas said in the statement. “We have worked diligently to fulfill all of the ethics and internal controls criteria necessary to being a good federal government contractor.”

MCI has undertaken a “diligent effort” to fix past problems, Neurauter wrote. “So far as I can determine, everyone involved in the earlier wrongdoing has been separated from the company,” he said.

Four ongoing investigations of MCI do not warrant a continued debarment, Neurauter added. Those investigations are being conducted by the U.S. Federal Communications Commission for call-routing practices; the GSA and the U.S. Department of Justice for carrier charges under a federal contract; the state of Oklahoma for state security law violations related to the accounting scandal; and the U.S. Attorney for the Southern District of New York for the accounting practices.

MCI will remain on a three-year probationary period with the GSA, during which the company must adhere to “stringent” reporting requirements, according to the GSA.

“While I have noted the extensive remediation efforts accomplished by WorldCom, I am also mindful of the unprecedented severity of the earlier wrongdoing that made these reforms imperative,” Neurauter wrote to Capellas. “The agreement between GSA and WorldCom will ensure that the reforms at WorldCom continue in full force and effect, so that the new corporate culture becomes deeply rooted.”