Global Crossing battles accounting controversy

A wailing chorus of investors have joined a former Global Crossing Holdings Ltd. financial vice president in criticism of the accounting practices of this provider of telecommunication services. Together, the picture they paint portrays the company's executives as negligent at best, and purveyors of fraud at worst.

In a press release issued Monday, Roy Olofson, former vice president of finance for Global Crossing, accused company executives of improperly describing the company's revenue to the public. Olofson, through his attorneys at Los Angeles law firm O'Neill, Lysaght & Sun LLP, said Global Crossing improperly recorded long-term sales immediately rather than over the term of the contract, that the company improperly booked swaps of capacity with other carriers as cash transactions, and that Global Crossing fired him when he blew the whistle.

His attorney said all Olofson wanted to do at first was fix the books. Now he wants restitution for his lost job, but he is unlikely to get it from Global Crossing itself -- which is under bankruptcy protection. Olofson isn't suing anybody yet, but he's thinking about it.

In a separate action, the Los Angeles law firm of Weiss & Yourman LLP filed a class-action lawsuit on Monday against five of the company's top executives. The suit charges them with violating federal securities laws by participating "in a fraudulent scheme and course of business .... by disseminating materially false and misleading statements and/or concealing material adverse facts."

Because Global Crossing is under bankruptcy protection, Olofson cannot sue without the court's permission. Class-action lawsuits against the company require permission as well. That is why the class-action suit targets the executives themselves. If he files suit, Olofson would likewise sue company executives.

Other class-action lawsuits over Global Crossing's meltdown are also in the works.

Global Crossing said in response to Olofson's public statements that it reviewed Olofson's accusations and found them without merit. The company has reported its financial results in accordance with the law and is cooperating with a U.S. Securities and Exchange Commission (SEC) probe triggered by Olofson's allegations and the bankruptcy filing, a spokeswoman said.

She would not comment on a Friday report from USA Today which said the U.S. Federal Bureau of Investigation is also probing Global Crossing's accounting practices, nor would she comment beyond the company's press releases.

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