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Telecom Giant Barred From U.S. Contracts

Federal agency says WorldCom lacks internal controls and business ethics.

August 01, 2003|From Bloomberg News

WorldCom Inc., seeking to emerge from the largest bankruptcy in U.S. history, was suspended Thursday from competing for new government contracts, the General Services Administration said.

WorldCom, the No. 2 long- distance telephone company, lacks the necessary internal controls and business ethics to carry government calls and data traffic, the GSA said in a statement. The company has 30 days to challenge the decision.

The federal government generates about $1 billion a year in revenue for Ashburn, Va.-based WorldCom, making it the company's largest customer.

Competitors including SBC Communications Inc., Verizon Communications Inc. and AT&T Corp. have stepped up pressure to have WorldCom banned from federal business.

Also Thursday, U.S. Bankruptcy Judge Arthur Gonzalez in New York delayed a confirmation hearing to approve WorldCom's reorganization plan until Sept. 8 from Aug. 2 and ordered WorldCom to give creditors more information.

The developments come 14 months after WorldCom revealed it had overstated profits for several years.

The total amount exceeds $11 billion.

A "proposed debarment" was issued by the GSA, which triggers an immediate suspension of WorldCom's eligibility to compete for contracts, the agency said. The company's name will be entered into the GSA's excluded parties listing system today.

WorldCom would keep existing contracts, the GSA said.

The Justice Department began a probe of WorldCom's call routing last week amid claims the company rerouted and disguised calls to avoid paying tariffs to local phone companies.

On June 2 the GSA's office of the inspector general recommended that the agency's suspension and debarment official, Joseph Neurauter, consider whether the company met the standards of being "presently responsible."

Neurauter determined that WorldCom lacked the controls and ethics, the GSA said.

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