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Global in accounting probe
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February 4, 2002: 10:27 a.m. ET
After filing Chapter 11, company forms panel to look into accounting issues.
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NEW YORK (CNN/Money) - Global Crossing Ltd., which filed for bankruptcy protection last week, joined the throng of companies facing accounting questions as the company said Monday it will form a special committee of independent directors to review a former employee's allegations of improper accounting.
Hamilton, Bermuda-based Global Crossing said the committee will retain independent counsel and an accounting firm other than Arthur Andersen, the company's regular accountant, to review the matter.
Arthur Andersen also served as the former accounting firm for collapsed energy trader Enron.
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Last week, a spate of companies, including Williams Companies, Tyco International, Anadarko Petroleum, and PNC Financial Services Group, faced questions regarding their accounting practices.
Global Crossing said the Securities and Exchange Commission asked it to turn over certain corporate documents and a letter sent by the employee. Global Crossing said it complied with the SEC request.
Last week, the company said the employee wrote a letter in August warning that Global Crossing's accounting practices boosted revenues artificially.
The company said the allegations that it used improper accounting methods are "completely without merit." It also said the employee threatened to file a lawsuit unless he was paid "multiple millions of dollars."
Many of the allegations now facing Enron were also addressed by an employee to Enron management.
Global Crossing filed for protection in New York and Bermuda bankruptcy courts.
The company said an issue with its balance sheet led to its filing Chapter 11. "Ours is a balance sheet issue, not an operational one, and today's actions are intended to directly address this issue," said a statement from Global Crossing's chief executive, John Legere.
The company last week also announced a proposed $750 million investment from two major Asian telecommunications companies -- Hutchison Whampoa Limited and Singapore Technologies Telemedia Pte. Ltd. The company's statement said the restructuring under bankruptcy protection was part of the terms of that proposed investment.
"This investment, along with the financial and operational restructuring that we're implementing, will strengthen our balance sheet and enable Global Crossing to build a sustainable business on its existing unmatched global network."
Under the company's plans, creditors would share in a combination of cash, new debt, and new equity in the restructured company. Existing shareholders would not participate in the company's new ownership structure under the plan. 
--from staff and wire reports
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