-Caveat Lector- http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3SC1X7GXC&live=
true&tagid=IXLT95DZ1BC WJPBR Email News List [EMAIL PROTECTED] Peace at any cost is a Prelude to War! FBI launches Global Crossing accounting probe By Richard Waters and Joshua Chaffin in New York Published: February 8 2002 16:10 | Last Updated: February 9 2002 11:26 Scrutiny of Global Crossing intensified on Friday when it emerged that the Federal Bureau of Investigation had launched a probe into accounting practices at the bankrupt telecommunications group. The FBI's involvement came as the company said the Securities and Exchange Commission had also begun a formal investigation into the company's accounting methods. On February 4, Global Crossing received an inquiry from the SEC for the voluntary production of information in connection with issues raised in a letter from a former finance executive. The letter raised concerns that Global Crossing and its auditor, Andersen, were misleading investors about the accounting for certain long-term leases. The company refused to comment on the FBI investigation. The FBI also declined to comment. On the SEC probe, the company said: "Our policy is, and always has been, to co-operate fully with any authorities." The company, which last week filed for the second-biggest bankruptcy after Enron, joins a growing list of former high-flying American companies whose accounting methods have come into question. It also emerged this week that Global Crossing had kept its auditors in the dark about a letter from a "whistleblower" claiming that the company had misled investors with its accounting. The letter, from Ray Olofson, its former vice-president of finance, was received in August. However, the company has now admitted that until last week it was kept from Andersen, as well as the directors of the company's own audit committee. Global Crossing has questioned Mr Olofson's motives, saying his letter was accompanied by demands for a multimillion-dollar severance agreement. The company disclosed earlier this week that the SEC had asked it to hand over information related to the whistleblower's allegations. Meanwhile, the company's auditor, which has already become embroiled in the Enron collapse, tried to distance itself from the accusations. "It's a matter of serious concern that we were not informed in a timely manner," Andersen said on Friday. The audit firm added that it had "insisted" that Global Crossing appoint a special independent committee to review the accounting issues. The SEC's investigation centres on the way the company accounted for long-term wholesale contracts known as IRUs. Buyers of these contracts - normally other telecommunications companies - pay up-front for capacity on another company's network. Dan Cohrs, Global Crossing's chief financial officer, last week denied that the company had accounted for these transactions improperly, and said it had followed US accounting rules. He was unavailable for comment on Friday. Critics argue that Global Crossing and other telecoms companies acted improperly by taking the whole upfront payment under an IRU as revenue in the year it was received. However, Mr Cohrs said that this had been required under US rules until 1999, and that the company had adjusted its practices when the rules changed and required companies instead to spread the revenue gains over a number of years. Global Crossing also denied claims that it had engaged in clandestine "swaps" of network capacity with other telecoms companies. Accounting rules do not allow companies to include swaps as revenue in their accounts. *COPYRIGHT NOTICE** In accordance with Title 17 U. S. C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment to those who have expressed a prior interest in receiving the included information for nonprofit research and educational purposes only.[Ref. http://www.law.cornell.edu/uscode/17/107.shtml ] Want to be on our lists? 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