GSA will keep watching WorldCom
- By Patience Wait
- Nov 27, 2002
The General Services Administration will continue monitoring developments surrounding financially troubled WorldCom Inc., an agency spokeswoman said after the telecommunications company announced Nov. 26 that it had reached an initial settlement over a civil lawsuit filed by Securities and Exchange Commission.
WorldCom, the single largest provider of telecommunications services to the federal government, has consented to the entry of a permanent injunction that resolves claims brought in the Securities and Exchange Commission's civil lawsuit regarding WorldCom's past accounting practices, the company announced Nov. 26.
The various charges of fraud and mismanagement against WorldCom triggered calls from labor unions and former WorldCom employees for the government to rescind the company's contracts, but so far the government has not taken steps in that direction.
"GSA is working with its agency customers and continues to monitor developments" with WorldCom, said GSA spokeswoman Maryalice Johnson when asked about the settlement with the SEC.
The news that WorldCom has settled the civil fraud lawsuit with the SEC means that the company's position as the pre-eminent provider of telecom services to the federal government is likely to remain unchanged. While GSA may be monitoring WorldCom, the agency in October announced it was exercising a one-year option to extend WorldCom's tenure on FTS2001, the contract to provide long-distance services to federal agencies.
And last month, the General Accounting Office denied protests of the company's receipt of the Defense Research and Engineering Network contract from the Defense Information Services Agency in April on grounds that the company misrepresented its financial condition. WorldCom will provide networking services to more than 6,000 research professionals around the country under the 10-year, $450 million DREN contract.
WorldCom earned more than $462.5 million from its government contracts in fiscal 2001, according to the General Services Administration, and performed work for 20 different departments and agencies, including the departments of Commerce, Defense and Justice, NASA and the SEC itself.
Under the permanent injunction entered by the U.S. District Court for the Southern District of New York, the company neither admits nor denies the commission's allegations and agrees to the following:
* Not to violate securities laws in the future;
* To provide reasonable training and education to its senior operational officers and financial reporting personnel to minimize the possibility of future violations;
* To retain a consultant to review the effectiveness of WorldCom's material internal accounting control structure and policies; and
* That the Corporate Monitor in the case will review the adequacy and effectiveness of WorldCom's corporate governance and ethics policies.
WorldCom also agreed that either the SEC or the court may in the future seek a civil penalty to be paid by WorldCom or further equitable relief or sanctions.
"The requirements of this agreement are squarely in line with steps we are already taking to restore public confidence in WorldCom," said John Sidgmore, president and chief executive officer of the Clinton, Miss., company. "Our agreement with the SEC provides additional assurance that WorldCom's plan to emerge from bankruptcy remains on schedule."
WorldCom filed for bankruptcy July 21 after the company revealed in June that it had improperly accounted for $3.9 billion in expenses. Since then, the figure has risen to more than $9 billion. The SEC filed fraud charges against the company, and the company's stock, which fell to below $1 per share, has been delisted by Nasdaq.