MCI cleared for contracts

Telecommunications giant MCI will not be banned from taking new federal contracts.

General Services Administration officials announced late today that they will not debar the firm, but will monitor it closely for three years. The proposed debarment, which prohibited agencies from awarding new work to the company in most cases, has been lifted and the company is again available for federal work.

The company, formerly WorldCom, has made the necessary changes to ensure that its 2002 accounting scandal won't recur, said David Drabkin, GSA's deputy associate administrator for acquisition policy. "There were substantial changes in the way [MCI] does business."

Independent audits by Deloitte & Touche and a bankruptcy court monitor confirm GSA's determination, Drabkin said.

However, agency officials signed an agreement with MCI for ongoing monitoring. The company must immediately report to GSA any material changes, including changes to its executive team, its board of directors or any new allegations, for example.

"We're concerned, given the gravity of the problems that led to our proposed debarment, that we watch to make sure these changes become part of their internal environment," Drabkin said. The company "isn't out of the woods yet. They are still tied very closely to us in terms of our ability to monitor them."

MCI's sigh of relief comes after almost six months of waiting and being barred from taking new federal work. GSA's inspector general first recommended that the agency consider debarment in June 2003, and the agency suspended the company July 31, 2003, while suspension and debarment official Joseph Neurauter considered appropriate action.

Federal officials expressed concern about whether MCI now has sufficient internal controls to prevent a recurrence of the accounting lapses that prompted criminal investigations and sent the company into Chapter 11 bankruptcy in 2002. GSA officials considered reports from former U.S. Attorney General Richard Thornburgh, the Report of Investigation by the Special Investigative Committee of MCI's board of directors and a report by KPMG LLP, Drabkin said last summer.

MCI during the past several months has been working to rehabilitate its image. The company dropped the WorldCom name and moved its headquarters from Mississippi to Ashburn, Va. It also won court approval of a settlement with the Securities and Exchange Commission and a plan to emerge from bankruptcy.