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GSA Actions Leading to Proposed Debarment of WorldCom

GAO-04-741R Published: May 26, 2004. Publicly Released: May 26, 2004.
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Highlights

On June 25, 2002, WorldCom, Inc., announced its intention to restate its financial statements for 2001 and the first quarter of 2002, reducing previously reported earnings by nearly $4 billion. WorldCom's announcement sparked a series of investigations by the Securities and Exchange Commission (SEC), the Department of Justice, and WorldCom's Board of Directors, among others, and eventually resulted in criminal charges against six of its corporate officials. WorldCom filed for bankruptcy protection in July 2002, and, over the next several months, announced restatements for additional periods. On July 31, 2003--over a year after WorldCom first announced its intention to restate its earnings--the General Services Administration (GSA) formally proposed the company for debarment, making the company ineligible for future government contracts. When WorldCom consented to a 3-year administrative agreement allowing GSA to continue monitoring the company's conduct, GSA terminated the debarment proceedings on January 7, 2004. House Report 108-243, which accompanied the Transportation, Treasury, and Independent Agencies Appropriations Act, 2004, required us to review the actions GSA took between WorldCom's June 2002 announcement and GSA's July 2003 decision to propose the company for debarment. We agreed to (1) identify the GSA offices involved and the actions they took and (2) describe the sources of information on which GSA relied in considering WorldCom for debarment.

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BankruptcyContractor debarmentCrimesFinancial statementsInvestigations by federal agenciesIndependent agenciesCriminal investigationsTransportationGovernment contractsE-mail