WASHINGTON Probe results prompt feds to halt business with MCI

MCI chairman says the company is rebuilding its ethics program.
WASHINGTON (AP) -- The General Services Administration suspended federal business with MCI after an investigation concluded the bankrupt telecommunications giant lacks necessary internal controls and ethics.
MCI's government contracts are valued at more than $1 billion each year. The company said it would not challenge the GSA's Thursday decision, which does not affect existing government contracts.
"We are in the process of rebuilding our ethics program and understand that there is still more work to do," MCI Chairman Michael Capellas said. He said the company will work to regain approval for new government business by addressing the GSA's concerns.
WorldCom woes
The GSA's decision is the latest blow to the company formerly known as WorldCom. It was among the fastest-growing and most aggressive players in the telecom and Internet boom.
After WorldCom was driven into bankruptcy by an $11 billion accounting scandal, it proposed adopting the name of its MCI long-distance division in a bid to clean up its image. A bankruptcy court is considering efforts by the company to emerge from Chapter 11 bankruptcy protection.
MCI is accused of falsifying balance sheets to hide expenses and inflate earnings. Its collapse and bankruptcy wiped out up to $200 billion in shareholder wealth.
The Justice Department also is investigating accusations by rival carriers and former MCI executives that the company defrauded other telephone companies of hundreds of millions of dollars.
The investigation centers on whether MCI masked long-distance calls as local calls and diverted others to Canada to avoid paying special-access fees to local carriers across the country.
MCI has said its competitors are trying to throw up roadblocks to its emergence from bankruptcy.
Critics and competitors have said the government has been too lenient with the company by continuing to award it work, including hiring MCI to build a wireless phone network in Iraq.
Suspension
A GSA suspension preventing new contracts usually lasts less than a year. During the suspension, the GSA will decide whether to impose a more serious penalty called debarment, which could exclude the company from government business for a period typically not longer than three years.
Capellas said government contracts account for a small percentage of the company's business and the suspension would not affect plans to emerge from bankruptcy.