Group: Bar WorldCom as contractor

Citizens Against Government Waste

Citizens Against Government Waste (CAGW), a taxpayer advocacy group, has renewed its effort to get WorldCom Inc. locked out of federal contracts and socked with stiff financial penalties.

In a letter sent March 4 to new Securities and Exchange Commission Chairman William Donaldson, CAGW President Tom Schatz called WorldCom "the largest corporate criminal in U.S. history."

WorldCom, one of the two original telecommunications companies awarded the General Services Administration's FTS 2001 contract for long-distance voice and data services, misstated its earnings by more than $9 billion in 2002. The ensuing scandal led to the departure of Chief Executive Officer Bernie Ebbers and a bankruptcy filing.

However, GSA resisted pressure from several groups, including CAGW, to bar WorldCom from federal contracts, and granted the telecom firm a one-year extension to continue its FTS 2001 contract through January 2004.

WorldCom "continues to receive lucrative federal contracts at taxpayer expense while private industry has opted to do business with more stable telecommunications firms," Schatz wrote.

WorldCom maintains that its accounting issues don't affect the company's ability to provide services to customers.

Schatz also accused WorldCom of continuing to misstate its financial position, citing a January New York Times report about a sharp drop in new WorldCom contracts. The report contradicts a WorldCom advertising campaign in late 2002 that claimed the company is doing a brisk business in account renewals and new contracts, Schatz charged.

"The Times article reveals that these WorldCom ad statements are optimistic fabrications at best and a recurring deceit at worst," he wrote. "In either case, WorldCom has again displayed unacceptable behavior. The company cannot be trusted to convey to the American public truthful and honest information about its financial situation."

Schatz urged Donaldson to punish WorldCom severely. "Take any and all necessary action against WorldCom in order to restore confidence in our financial markets by demonstrating that costly corporate crimes will be appropriately punished," he wrote.

The letter asks Donaldson to open a new investigation into WorldCom's misdeeds and levy "an appropriate fine."

An SEC spokesman declined comment on the letter.