“Make punishment fit crime,” says Schatz

(Washington, D.C.) — Citizens Against Government Waste today urged Securities and Exchange Commission (SEC) Chairman William Donaldson to show he is tough on corporate crime by levying an appropriate monetary penalty on WorldCom.

In a letter sent to Donaldson yesterday, CAGW President Tom Schatz said, “Unfortunately, on the issue of WorldCom, the SEC failed to set a firm but fair example for the financial community.”  Schatz suggested focusing on the penalty phase of the settlement with WorldCom, “the largest corporate criminal in U.S. history,” which “misstated earnings by more than $9 billion while investors lost more than $150 billion.”

The attached letter further stated, “Our concern about WorldCom arises from the fact that it continues to receive federal contracts even while private industry has opted to do business with more stable telecommunications firms.  WorldCom appears to be receiving undo support from the federal government at the expense of taxpayers.  If private industry operating on free market principles opts not to do business with WorldCom, why does the federal government continue to award the company lucrative contracts?”

While a financial penalty against WorldCom has yet to be determined, the partial settlement reached on November 26, 2002, noted that the final amount, if any, would be influenced by WorldCom’s behavior.  Schatz pointed out in his letter that WorldCom misled the public about its financial condition in its September to November multi-million ad campaign.  Schatz cited a January 30 New York Times article which “reveals that these WorldCom ad statements are optimistic fabrications at best, and a recurring deceit at worst. In either case, WorldCom has again displayed unacceptable behavior—it cannot be trusted to convey to the American public truthful and honest information about its financial situation.”

Schatz concluded by urging Donaldson to “put taxpayers' money to good use and take any and all necessary action against WorldCom in order to restore confidence in our financial markets by demonstrating that costly corporate crimes will be appropriately punished.”

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