“It is time for the government to stop doing business with the company,” says Schatz

(Washington, D.C.) — Citizens Against Government Waste (CAGW) today praised Senate Judiciary Committee Chairman Orrin Hatch (R-Utah) for his leadership in investigating MCI’s bankruptcy proceedings and its effect on competition within the telecommunications industry.  At a hearing this afternoon, Chairman Hatch is expected to hear testimony on the issue from industry experts, including Bankruptcy Examiner and former U.S. Attorney General Richard Thornburgh, who earlier this year authored a report on MCI’s bankruptcy.

“We commend Chairman Hatch for taking a closer look at whether MCI could emerge from bankruptcy with an unfair advantage that would threaten the financial stability of the entire telecommunications industry,” CAGW President Tom Schatz said.  “If MCI was allowed to compete unbridled of its debt, it could force prices across the industry to nosedive.  As telecommunications is one of the largest sectors of the American economy, such an occurrence could lead to a huge government bailout, costing taxpayers tens of billions of dollars.”

Chairman Hatch is the latest member of Congress to become involved in MCI’s bankruptcy.  Senate Governmental Affairs Committee Chairman Susan Collins (R-Maine) has launched an investigation into why the federal government continues to grant contracts to the company despite its fraudulent history.  Sen. Rick Santorum (R-Pa.) has offered legislation that would close a loophole in federal tax law that has allowed bankrupt companies to continue to receive tax benefits from their net operating losses despite having their corporate debt dramatically reduced during the bankruptcy process.  In the House, Rep. John Sweeney (R-N.Y.) is supporting an amendment to be offered to the fiscal 2004 Transportation Appropriations Act that would suspend MCI from federal contracts for the year.

“Despite the valiant efforts of several members of Congress, the federal government continues to do business with a fraudulent company, MCI, jeopardizing tax dollars,” Schatz continued.  “This past week, the House of Representatives itself extended a contract with MCI worth $17 million.  This adds to the more than $1.2 billion the company has received in government contracts since declaring bankruptcy, which is approximately 60 percent greater than the $750 million fine MCI will pay in its settlement with the Securities and Exchange Commission.”

CAGW has been calling for MCI’s debarment from government contracts since November, 2002, on the basis that such agreements unnecessarily put taxpayer dollars at risk, and amount to a hidden government bailout of the company.  Continuing its ad campaign, “Crime Doesn’t Pay,” from last month, CAGW has been running ads over the course of the last week in Congress Daily, The Hill, Roll Call, The Washington Times, and The Weekly Standard.

“When Enron and Arthur Andersen committed similar fraud, they were debarred.  The question remains, why is the government allowing this double standard to continue?”  Schatz concluded.  “More than a year has passed since MCI has declared bankruptcy.  It is time to protect taxpayers from being the latest victims of MCI’s fraud.”

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