(Washington, D.C.) – Today Citizens Against Government Waste (CAGW) responded to a report that the Securities and Exchange Commission (SEC) allegedly will not fine bankrupt telecom giant WorldCom for its fraudulent practices.  According to a report by Bloomberg, 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,” CAGW President Tom Schatz said.  “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.