SEC Probes Global Crossing Allegations

Federal securities regulators are looking into an ex-employee’s allegations that Global Crossing Ltd. used misleading accounting techniques to enhance its revenue, according to the company and the ex-employee’s attorney.

Officials at the Securities and Exchange Commission apparently started their review this week after news that Roy Olofson, a former finance executive at Global Crossing, warned the company’s top attorney about his concerns in a letter in August.

The struggling telecommunications company filed for Chapter 11 bankruptcy protection Monday. The Bermuda-based company, which has executive offices in Beverly Hills, listed $12.3 billion in debt and $22.4 billion in assets--making the company’s bankruptcy filing the nation’s fifth-largest.

Dan Cohrs, Global Crossing’s chief financial officer, said Friday that the company has been contacted by the SEC about Olofson’s letter. He characterized the inquiry as a “routine question” from the commission, which regulates the U.S. securities market.

“They have asked us to provide them with some information, and we are cooperating with them,” Cohrs said. He said the commission wanted a copy of Olofson’s letter.

Attorney Brian C. Lysaght, who is representing Olofson, said he was contacted by the SEC on Wednesday. “It was clearly about Global Crossing,” he said. “But we’ve been playing phone tag.”

Kelly Bowers, the SEC’s assistant regional director in Los Angeles, would neither confirm nor deny that the agency had called both parties.

Olofson’s Aug. 6 letter, obtained by the Los Angeles Times, noted that he was “very disturbed” by Global Crossing’s aggressive accounting methods and urged the company’s general counsel, James Gorton, to investigate the matter. He asked Gorton not to involve Cohrs or Olofson’s boss, Joseph Perrone, who was the executive from the Andersen accounting firm in charge of Global Crossing’s account until he joined the company last year.

Gorton, who left Global Crossing shortly after receiving Olofson’s letter, said he circulated the letter among the company’s top managers and then hired an outside law firm, Simpson Thacher & Bartlett, to review the matter.

“No one expressed any alarm about [the letter] at all,” Gorton said. “Global Crossing disclosed [the disputed contract accounting] in their reports.”

Charles Cogut, Global Crossing’s attorney at Simpson Thacher, declined to comment Friday.

Gorton said he left Global Crossing because his three-year contract had expired and he wanted to move on--a decision he had disclosed to other executives weeks before Olofson’s letter arrived.

Global Crossing has said that the accounting practices Olofson questioned are used throughout the telecommunications industry, and that the company has carefully disclosed its methods.

The accusations come amid the debacle enveloping Enron Corp., the bankrupt Texas energy trader that received a letter from an Enron executive who was worried that the company’s accounting methods were misleading.

In U.S. Bankruptcy Court in New York, where Global filed its petition, telecommunications equipment maker Lucent Technologies Inc. said Global Crossing owes it at least $123 million, significantly more than the $31 million listed as the amount owed Lucent.

Lucent, based in Murray Hill, N.J., asked the Bankruptcy Court to force Global Crossing to accept or reject ongoing equipment and network contracts with Lucent.

Global Crossing, noting that Lucent is one of its largest and most important suppliers, said it is working to resolve the matter.

“Lucent has contracts with a variety of Global Crossing [operations] around the world,” said Global Crossing spokesman Dan Coulter.

“The difference in the amount ... arises from different interpretations of those contracts.”