GSA renews contract with WorldCom, bars executives from government work

The General Services Administration Wednesday suspended two former WorldCom executives from conducting business with the federal government, but at the same time renewed a massive telecommunications contract with the company for one year.

"GSA's decision to suspend former WorldCom Chief Financial Officer [Scott] Sullivan and former controller [David] Myers is based on adequate evidence of criminal wrongdoing," the agency said in a statement. Sullivan has been indicted on seven criminal counts, including securities fraud, conspiracy to commit securities fraud and filing false statements with the Securities and Exchange Commission. Myers has pleaded guilty to all those charges.

"Under federal law, an indictment or a guilty plea for such offenses is adequate evidence of misconduct to support suspension of these individuals from future government business," GSA said.

The suspension of the two executives will remain in effect for the duration of pending legal proceedings and apply to the entire executive branch of the federal government, GSA said.

The contract renewal applies to WorldCom's position on the FTS 2001 contract, which the company shares with Sprint Communications. GSA said WorldCom would continue to provide "mission-critical requirements" to federal agencies that use the contract. These agencies include the Defense, Interior and Commerce departments, as well as the Federal Aviation Administration, the Social Security Administration and the Nuclear Regulatory Commission. More than 75 agencies purchase long-distance telephone and data service under FTS 2001.

The estimated value of the contract is $11 billion over its lifespan. Agencies pay for service based on how much they use. WorldCom and Sprint are guaranteed minimum revenue payments of $750 million each.

The contract was awarded in 1999. The renewal covers the period from Jan. 11, 2003, through Jan. 10, 2004.

WorldCom filed the largest bankruptcy in U. S. history in July. The company's plummet was precipitated by a wave of accounting misstatements. Company officials now say WorldCom has misstated more than $9 billion in revenues.

In deciding to continue the government's financial relationship with WorldCom, GSA said, "[the company's] performance has been consistent with the terms of the contract even after the announcements early this year of WorldCom's financial difficulties and its Chapter 11 bankruptcy filing."

"GSA is working closely with the Department of Justice, which is representing the government's interests in bankruptcy court to ensure that FTS contract interests are being taken into account and are not impaired," the agency said.

Jerry Edgerton, senior vice president of WorldCom's government division, said the contract renewal is proof that the company's ability to provide telecom services remains "rock solid."

WorldCom officials had no comment about the suspension of former executives Sullivan and Myers.

GSA had been reviewing all of WorldCom's federal contracts. The renewal of FTS 2001 strongly signals that the company is unlikely to be prohibited from doing business with the government in the near future.

A coalition of advocacy and union groups, including the Communications Workers of America, the Gray Panthers and the National Consumers League, has been calling for GSA to bar WorldCom from bidding on government contracts. The group cited GSA's suspension in March of Enron Corp. and accounting firm Arthur Andersen from conducting future government business to argue for action against WorldCom.

In suspending Enron and Andersen, GSA cited their accounting irregularities. Enron misstated financial figures and engaged in off-the-books transactions, and Andersen was convicted of obstruction of justice in the investigation of Enron's practices. Andersen was also Enron's auditing firm.

A GSA statement in March said that the companies had engaged in activities that "seriously impact their suitability to receive government contracts."