Today Citizens Against Government Waste (CAGW) responded to reports that the Securities and Exchange Commission
(SEC) allegedly will not fine bankrupt telecom giant WorldCom for its
fraudulent practices. According to Reuters, The San Diego-Union, Houston
Chronicle, and other news sources, the company and SEC officials may have
reached a settlement that allows for the establishment of court ordered
financial controls, which if broken could lead to a fine. In addition to
filing for bankruptcy, WorldCom has admitted to committing at least a $9
billion accounting fraud, and two of its top executives have already been
arrested while more investigations continue.
"If these reports are true, it is inconceivable that a company could
conduct itself in such a manner and not be fined," said CAGW President Tom
Schatz. "Through the criminal actions of WorldCom executives, thousands of
investors lost millions of dollars and thousands of employees were laid off.
Now the SEC might only provide the company with a slap on the wrist."
Both Enron and Arthur Andersen received fines for similar behavior. An
investigation into WorldCom's activities is still ongoing at the Department of
Justice which could result in more severe penalties for the company and/or its
executives. The company hopes to emerge from bankruptcy in March and repay
the $41 billion it claims to owe creditors.
"If the SEC makes such a decision, it would set a bad precedent," Schatz
continued. "The role of the SEC is to protect investors and enforce rules.
Federal laws and regulations are clear that the government may only award
contracts to contractors with a satisfactory record of integrity and business
ethics. At a time of low investor confidence, failure to act in a consistent
manner could be a blow to an already weak economy."
This is not the first time the government has appeared to be lenient with
WorldCom. Just two weeks ago, the General Services Administration extended a
contract to the company worth an estimated value of $11 billion over its
lifetime. The deal is for telephone long-distance and data service for the
Departments of Defense, Commerce, and Interior, along with the Federal
Aviation Administration, the Social Security Administration, and the Nuclear
Regulatory Commission.
"The federal government should not be doing business with a company that
by the admission of its own executives is guilty of bad business practices and
criminal activity. WorldCom should be barred from doing business with the
government, just as Enron and Arthur Andersen have been for similar fraudulent
practices," concluded Schatz. "The SEC should be fair, but tough on WorldCom.
This is no time for a whitewash of the white collar crimes at WorldCom."
Citizens Against Government Waste is a nonpartisan, nonprofit organization
dedicated to eliminating waste, fraud, mismanagement and abuse in government.