LOS ANGELES - Global Crossing Ltd., the fiber optics network firm that filed for bankruptcy protection, is drawing further scrutiny from the Securities and Exchange Commission after a former executive charged the company with accounting irregularities. <br>
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The FBI, which focuses strictly on criminal matters, has also begun investigating, although its inquiries fall far short of a formal investigation, U.S. law enforcement sources said Friday. <br>
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The SEC has subpoenaed company documents, including e-mails, contracts and correspondence, said Tisha Kresler, an SEC spokeswoman. Kresler refused to comment on whether the FBI had become involved.<br>
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The SEC investigation is an expansion of earlier requests for information. The probe focuses on allegations made by Roy Olofson, vice president of finance until last November, that the company misstated revenue and expenses. <br>
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Global Crossing officials have said the charges are without merit and that they are cooperating with the investigation. <br>
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Olofson made his allegations last August in a letter to the firm's top lawyer, advising him the company was inflating revenue and cash flow to enhance the appearance of results. <br>
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Olofson claimed the company boosted sales in the last few days of some quarters by ``roundtripping'' - booking a sale of capacity to a customer and then purchasing a similar amount of capacity back from the client. In the second quarter of 2001, Global Crossing did approximately 13 roundtrip transactions, he said. <br>
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``Global Crossing was giving the impression that it was generating cash revenues when, in actuality, these transactions did not increase the cash position of the company in any material sense,'' Olofson's lawyer Brian Lysaght said in a statement this week. <br>
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Global Crossing spent billions of dollars over the last five years building a global fiber optics network. When the Bermuda-based firm, which has executive offices in Beverly Hills, filed for bankruptcy protection Jan. 28 it listed $12.3 billion of debt and $22.4 billion of assets - making it the largest telecom bankruptcy case in U.S. history. <br>
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Olofson also charged that seven months before the company filed for bankruptcy protection, the company's chief financial officer wanted to warn investors that sales were slowing, but felt he couldn't because the chairman had just dumped nearly $124 million worth of stock, Lysaght said. <br>
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Global Crossing Chairman and founder Gary Winnick sold nearly 10 million shares on May 23. In all, he sold about $735 million of stock before bankruptcy filings, according to a review of regulatory filings by Thomson Financial/Lancer Analytics, which tracks insider data. <br>
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Global Crossing said Olofson's claims are ``questionable'' as he is seeking a multimillion-dollar settlement following his termination in November. <br>
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Paul Murphy, one of Olofson's lawyers, said Global Crossing is engaging in a ``carefully orchestrated smear campaign'' against his client.
