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FBI, SEC investigating Global
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February 8, 2002: 3:44 p.m. ET
Officials to probe accounting practices of bankrupt fiber-optic networker.
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NEW YORK (CNN/Money) - The U.S. Federal Bureau of Investigation is investigating bankrupt fiber-optics networking firm Global Crossing Inc., a law enforcement official told CNN Friday, the same day Global Crossing said it was also the subject of a Securities and Exchange Commission probe.
Officials refused to give any details about the FBI inquiry, and Global Crossing earlier declined to comment on published reports about it.
The Hamilton, Bermuda-based company said the SEC will investigate issues raised by former executive Roy Olofson, who has claimed the company's accounting practices artificially inflated its results - reminiscent of Sherron Watkins, the whistle-blower at Enron Corp., which also recently filed for bankruptcy and is being investigated for its accounting practices.
Global Crossing, one of the largest U.S. owners of fiber-optic cables linking the United States to Europe and other areas of the world, offered no further details.
"Our policy is and has been to cooperate fully with any investigation by appropriate authorities," a company spokesman told CNNfn.
Global Crossing filed for Chapter 11 bankruptcy protection on Jan. 28, with about $12 billion in debt and assets of more than $22 billion. It was the fourth-largest filing in U.S. history, according to Bankruptcydata.com. Enron's bankruptcy, filed in December 2001, is the largest.
Olofson's allegations led Global Crossing to form an internal committee to investigate its accounting practices. Enron has its own investigative committee, run by University of Texas Law School Dean William Powers, which this weekend produced a preliminary report that blasted Enron's auditor, Arthur Andersen -- the same firm that audited Global Crossing.
Olofson was one of 1,200 employees let go by the company in November as a cost-cutting measure. His attorney has threatened to sue Global Crossing for wrongful termination, claiming Olofson was fired only because he asked questions about the company's accounting practices. Global Crossing has denied that claim.
Several shareholder lawsuits already have been filed against Global Crossing, accusing it of misleading investors and falsely inflating its stock price.
The failure of both companies and the accounting scandals surrounding them have shaken investor confidence in the practices of several other companies and led for cries from the U.S. Congress and regulators for reform in the accounting industry.
Global Crossing was also dragged down by a slowdown in corporate spending on telecommunications technology, the hangover from a spending bubble in the late 1990s. Corning Inc. (GLW: up $1.01 to $7.45, Research, Estimates), a Global Crossing competitor, said Friday its first-quarter results could disappoint expectations. It also made sure to add that it thought it had enough cash flow to remain solvent in 2002. 
-- from staff and wire reports
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