Recent MCI allegations weren’t a factor in suspension

Recent allegations that bankrupt telecommunications giant MCI improperly avoided paying fees to its rivals for use of their phone lines did not prompt the government to suspend the company from competing for federal contracts, federal officials said Friday.

Officials at the General Services Administration, which moved Thursday to bar MCI from competing for new contracts, were aware of the allegations made over the past several days to news organizations by MCI competitors AT&T and Verizon, Ray McKenna, GSA's general counsel, said in an interview with Government Executive.

However, the official who made the decision to propose debarment did not take the allegations into account, McKenna said. "The timing is coincidental," he said.

The debarment official also didn't see a letter sent Monday to GSA administrator Stephen Perry by Verizon's general counsel, William Barr, a former U.S. attorney general. In that letter, Barr called upon Perry to debar MCI in light of its business practices. MCI's rivals say the company routed calls through Canada to avoid paying its competitors usage fees for their lines.

AT&T officials also told The New York Times July 27 that they would give the government evidence that some of those calls were placed by the State Department and other government agencies.

David Drabkin, GSA's deputy associate administrator for acquisition policy, said in an interview that the agency had no plans to investigate whether any of the alleged calls were made as part of any GSA contracts. He also said the agency has received no request to take action on the matter.

Drabkin said that if GSA received such a request it could amend its proposal for debarment to add new allegations, and then ask MCI to respond to them. Under the terms of the debarment proposal issued Thursday, MCI has 30 days to respond to GSA's concerns about the company's internal controls and business ethics. Drabkin said, however, that it's not unusual for GSA to extend that response period if a company can show it is making progress addressing the matters.

If MCI can "demonstrate they're responsible by taking appropriate actions that satisfy us . . . we would lift the proposed debarment," Drabkin continued. That would allow MCI to continue competing for government work.

GSA had been considering for several weeks whether to propose debarment of MCI in light of revelations about the company's accounting practices. MCI agreed in May to pay a $500 million civil penalty in a settlement with the Securities and Exchange Commission over charges of massive accounting improprieties. Despite having declared the largest corporate bankruptcy in U.S. history, MCI has won a number of high-profile government contracts in recent months.

McKenna said GSA has taken "criticism from various creditors of MCI and from certain members of Congress for not acting sooner" on whether to bar the company from government contracting. However, he said that requests to the Federal Communications Commission and the Justice Department to give GSA information from their investigations of MCI's business practices, which McKenna said might have helped GSA, were denied. McKenna said insufficient "access to information" from other agencies was "a big part of the problem" in not making the debarment decision sooner.

McKenna also said "no input was received by our office from the White House" about whether to debar MCI. However, he noted that the White House "was aware of the fact" that GSA was considering the action.

McKenna said it's "conceivable" that the GSA inspector general could look into the allegations about rerouted calls. However, Drabkin emphasized that these charges weren't shared with the GSA debarment official working on MCI's case because they haven't been substantiated.

Several telecommunications industry experts and executives contacted for this story speculated that many rerouted calls made by agencies holding contracts with MCI would have been placed under the FTS 2001 contract, a multibillion-dollar agreement under which 195 governmental organizations receive long-distance and data services. Under that contract, MCI is currently charging customers 1.67 cents a minute for outbound domestic long distance calls, said Mary Alice Johnson, a GSA spokeswoman. Sprint, which shares the contract with MCI, charges 2.3 cents a minute for the same calls, Johnson said.

MCI provides services to 57 percent of the federal organizations that have signed up for the contract, Drabkin said. He said that if MCI were barred completely from current contracts, GSA would solicit services from Sprint.

MCI's part of the FTS 2001 contract expires in January 2004, Drabkin said. The agency must decide by November 2003 whether to exercise its option to renew the contract, he said, adding that it's "impossible to predict" now whether GSA will do so.

However, GSA sent a letter to FTS 2001 customers Thursday advising them of the agency's decision to propose debarment, and asked them to voice any concerns they'd have about switching from MCI to another vendor, McKenna said.

Two years ago, GSA switched customers from AT&T to MCI when MCI won a slot on FTS 2001 that had been held by AT&T. The transition took 18 months to complete, McKenna said. It also led to congressional oversight hearings over GSA's management of the contract.