(Washington, D.C.) – Citizens Against Government Waste (CAGW) President Thomas A. Schatz sent a letter to Judge Jed Rakoff, United States District Court, Southern District of New York offering third party comment in Securities and Exchange Commission (SEC) v. WorldCom, Inc. (Case No. 02-CV-4963).  Excerpts from the letter follow:

CAGW’s concern over this matter relates primarily to the fact that your decision on an appropriate penalty for WorldCom will have an enormous impact on government contracting and the nation’s taxpayers.  Without a penalty that is substantial enough to deter fraudulent behavior by corporations in the future and force the government to consistently apply its Federal Acquisition Regulations (FAR), taxpayers may be subject to the continued waste and abuse of their money.

The FAR empower the General Services Administration (GSA) to suspend companies from doing business with the federal government when a company’s offense is serious enough to affect the “present responsibility” of the contractor.  In addition, the regulations require that firms seeking to do business with the government have a satisfactory record of business ethics and integrity.

CAGW fully understands that the U.S. Courts have no authority to debar companies from receiving federal contracts.  However, your decision on the appropriate penalties and potential changes to the company’s corporate governance and accounting infrastructure will certainly carry great weight in procurement decisions made by the federal government.  Taxpayer money should not be used to artificially prop up and bail out a contractor that has, by the actions of its own executives and employees, brought that company to ruin.

     Your decision will have far-reaching implications on many levels.  It will deliver a message to white collar criminals everywhere, to shareholders, employees, customers, and taxpayers about how aggressively our nation’s criminal court system will deal with transgressions of this magnitude.

For a copy of the full letter, please go to www.cagw.org.

Citizens Against Government Waste is the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.  For more information, please visit www.cagw.org.