(Washington, D.C.) – As expected, the Securities and Exchange Commission (SEC) reached a partial settlement yesterday with telecom giant WorldCom in which the company may not be fined for its fraudulent practices.  Citizens Against Government Waste (CAGW) blasted the decision for its leniency and contradiction of government policy.  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.

“Through the criminal actions of WorldCom executives, thousands of investors lost millions of dollars and thousands of employees were laid off.  Now it appears as if the SEC will only provide the company with a slap on the wrist,” CAGW President Tom Schatz said.  “The role of the SEC is to protect investors and enforce rules.  Although it has yet to pass the Senate, the Senate Appropriations Committee approved the SEC’s request for more money and doubled their operating budget to a FY 2003 level of $750.5 million.  If the SEC is going to investigate, but not punish companies who commit fraud, then why do they need the extra money?”

According to the partial settlement, WorldCom agreed to not violate any SEC laws in the future, hire a consultant to oversee the company’s accounting structure and policies, train senior operational and financial officers to reduce the risk of future SEC violations, and allow the court to continue to monitor its corporate governance and ethics policies.  The SEC reserves the right to later request the court to impose a fine.

“Arthur Andersen was fined $500,000 for obstruction of justice, yet WorldCom, which has by its own admission committed billions of dollars in fraud, warrants only a few months of investigation and possibly not even a fine,” Schatz continued.  “WorldCom was the largest bankruptcy in history.  At a time of low investor confidence, failure to act in a consistent manner could be a blow to an already weak economy.”

Another contradiction of federal policy exists that pertains to WorldCom.  Just two weeks ago, the General Services Administration extended a contract to the company worth an estimated $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.

“As the law requires, WorldCom should be suspended from doing business with the government, just as Enron and Arthur Andersen have been for their own fraudulent practices,” concluded Schatz.  “The federal government needs to be consistent and fair, and in the case of WorldCom, it was neither.”

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.