FBI and SEC Will Investigate Global Crossing's Accounting
The Federal Bureau of Investigation (FBI) and the Securities and Exchange Commission (SEC) are investigating the accounting practices at Global Crossing, the telecommunications company that filed the fourth largest corporate bankruptcy in U.S. history last month. Andersen is the auditor for Global Crossing.
The SEC has asked Global Crossing to hand over documents as well as a letter written by a former employee allegedly describing accounting practices of reporting pro forma values for cash revenue and adjusted earnings before interest, taxes, depreciation and amortization.
In addition, it was discovered last Friday that Global Crossing had eased terms on $18 million in loans to two top executives just before the company filed for bankruptcy in January.
Although the FBI's role in the Global Crossing investigation has not been made clear, legal experts speculate that there is evidence of criminal activity which spurred the agency into action. "The FBI's general mandate in these kind of cases is not to get into it until after the SEC has concluded its investigations," said Martin Pollner, a senior partner with the New York law firm of Loeb & Loeb and the former head of law enforcement for the U.S. Treasury department. "However, if there are allegations of extortion or bribery, the FBI steps in very quickly, that's their jurisdiction."
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