Senators Take Issue with WorldCom Contract; U.S. Awarded Firm Pact despite Fraud Revelations

The Washington Times (Washington, DC), July 23, 2003 | Go to article overview

Senators Take Issue with WorldCom Contract; U.S. Awarded Firm Pact despite Fraud Revelations


Byline: Patrice Hill, THE WASHINGTON TIMES

Senators questioned yesterday whether the government has been too lenient with WorldCom Inc., awarding it lucrative contracts and allowing it to emerge from bankruptcy free of most debts despite its record-breaking fraud on the public.

At a hearing of the Senate Judiciary Committee, witnesses for the telecommunications giant's competitors such as Verizon Communications Inc. and AT&T Corp. criticized the "slap on the wrist" that WorldCom has received after the government severely penalized and drove out of business Enron Corp. and Arthur Andersen LLP for committing similar massive fraud.

Sen. Richard J. Durbin, Illinois Democrat, asked why the Bush administration awarded WorldCom's MCI division a much-sought contract to build a mobile-phone network in Iraq in the spring, though last year it quickly barred Enron and Andersen from further business with the government after their fraud was revealed.

"Isn't that sending a message that corporate misconduct of historic proportions is not a factor in doing business with the government?" Mr. Durbin asked.

Noting that 20,000 workers lost their jobs when Chicago-based Andersen was forced out of business by the government's obstruction of justice lawsuit, while WorldCom continues to employ 55,000, he said he cannot understand why the companies are being treated so differently.

"With WorldCom, it appears they're doing quite well ... not only not being penalized, but being rewarded by this administration," he said.

"I don't have any comfort that justice was served."

Committee Chairman Orrin G. Hatch, Utah Republican, was not as critical as several panel Democrats. But he, too, asked why WorldCom's creditors are being allowed to emerge as the biggest beneficiaries of the company's bankruptcy reorganization plan when they unquestioningly provided the money that fueled WorldCom's fraudulent empire.

"Don't they have some responsibility?" he asked. WorldCom revealed it had overstated revenue by $11 billion in a bombshell that shook markets in June 2002, he asked.

Former Attorney General Richard Thornburgh, who is leading a court investigation into WorldCom's financial abuses, testified that the company accumulated its debt of $40 billion before bankruptcy largely because of the deceptions and abuses of its top corporate officers.

But WorldCom's attorneys and board members argued that the company has paid a heavy price for its wrongdoing by being forced into bankruptcy and agreeing to a record settlement with the Securities and Exchange Commission to pay $750 million in restitution to former stockholders, who lost an estimated $60 billion as a result of its fraud and bankruptcy.

A reorganization plan that is nearing approval in a New York bankruptcy court leaves the company with $5. …

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