Global Letter by a ‘Moral’ Man

Roy L. Olofson was an “old-economy” stalwart amid the bustling salesmen and “new-economy” believers that built Global Crossing Ltd. into one of the darlings of the technology revolution.

The company was created around an ambitious plan to build a global telecommunications network. Its chief executive, Gary Winnick, proclaimed its technology plan “the future face of communications.”

In contrast, Olofson had spent nearly his entire career at such traditional companies as Fedco, where he was CEO, and Carter Hawley Hale Stores Inc., where he was vice president of finance.

The marriage between the 63-year-old executive and Global Crossing was an uncomfortable one--and it has now led to a messy divorce that has opened up the inner workings of the troubled company.

Olofson, who was fired in November, was the author of a letter written to Global Crossing executives in August, raising concerns about the company and its auditor, Andersen.

The letter questioned Global Crossing’s accounting practices concerning certain long-term leases. Olofson wrote he was “very disturbed” and “concerned that investors and commercial bankers may have been intentionally misled.”

The letter--along with questions from analysts and investors after the company’s bankruptcy filing Jan. 28--has sparked an inquiry by the Securities and Exchange Commission.

Officials at Bermuda-based Global Crossing, which has its executive offices in Beverly Hills, call Olofson a litigious and disgruntled extortionist who has been trying to elicit a multimillion-dollar settlement from the company.

“This is a situation we are very familiar with ... and is without merit,” the company said in a statement. “Mr. Olofson is a former employee who is trying to draw parallels to the Enron situation for his own personal gain.”

Olofson’s attorneys insist he is a whistle-blower in the mold of Sherron S. Watkins, the former Enron executive who wrote a letter to former Enron Corp. Chairman Kenneth L. Lay outlining the accounting practices that ultimately brought down the company.

A ‘Moral Person’ With ‘High Standards’

“He’s a very straightforward, intelligent, moral person who has been wrestling with these issues for a while,” said Paul Murphy, Olofson’s attorney. “He’s not doing this for the money.”

Olofson has refused to comment about his letter, but friends, former co-workers and rivals describe him as a stubborn, but principled businessman.

“If Roy thinks something is wrong, he will do something about it and won’t let it go,” said Brian Fleming, chief financial officer with BCBG MaxAzria who worked with Olofson for more than a decade at Carter Hawley Hale and the accounting firm PricewaterhouseCoopers when it was still known as Price Waterhouse.

“He has incredibly high standards,” Fleming said. “If accounting issues ever came up, he’d always insist that things got done properly.”

Olofson, a former Marine who grew up in the village of Kenmore, N.Y., graduated with a bachelor’s degree in business administration and accounting from UCLA in 1965.

Focus on Retailing, Manufacturing

Soon after graduating, he became a manager at Price Waterhouse, where he specialized in audit and tax issues in the retailing and manufacturing industries. He later left to join Carter Hawley Hale and after more than a decade, moved over to the executive team at Fedco. There he served as chief operating officer, chief financial officer and eventually CEO.

In 1996, Fedco overhauled its upper management team and laid off Olofson, who filed a breach of contract lawsuit against the company in Los Angeles Superior Court.

Olofson claimed he had a three-year employment contract with the company. The case was settled for an undisclosed sum. Both sides declined to comment.

Global Crossing, then a company with promising buzz, recruited Olofson in 1997 to be vice president of finance. Over the next four years, Olofson was responsible for processing all accounting transactions, preparing the company’s financial statements and handling its SEC filings.

Olofson became concerned about the company’s accounting practices last year, according to his August letter.

He had taken nearly three months off for medical leave in spring 2001 after being diagnosed with lung cancer. While gone, he kept track of the company’s various financial dealings, said his attorney Brian C. Lysaght.

What Olofson heard, and what he learned after he returned to Global Crossing in May 2001, alarmed him enough to write his five-page letter to James Gorton, the company’s general counsel and chief ethics officer, according to the document.

Gorton, who left Global Crossing about a month after receiving Olofson’s letter, said he provided copies of the letter to the company’s senior managers and hired an outside law firm to look into the allegations.

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

“No one expressed any alarm about [the letter] at all,” said Gorton, now a consultant for Ridgestone Corp., a Los Angeles private equity firm. “Global Crossing disclosed [the disputed contract accounting] in their reports.”

Olofson’s attorneys said the accountant was fired three months after giving his letter to Gorton.

Letter Disclosed Day After Bankruptcy Filing

The contents of the letter came to light Jan. 29--one day after Global Crossing filed for Chapter 11 bankruptcy protection, listing debts of $12.3 billion and assets of $22.4 billion. It is the fifth-largest bankruptcy case in U.S. history.

The company denied Olofson’s accusations. In a statement Monday, the company said Olofson asked for a “multimillion-dollar payment and a minimum seven-figure annual cash compensation package for a five-year period” to abandon his wrongful termination claim.

The company said it “terminated” Olofson in November as part of companywide staff cuts. According to the company’s statement Monday, Olofson gradually reduced his demands to an amount “representing less than one-tenth of the original.”

Global Crossing’s board of directors’ audit committee has now asked for an independent review of the allegations in Olofson’s letter.

Murphy, Olofson’s attorney, said Global Crossing’s statements were only to discredit his client. “He’s not relishing this publicity, but he’s pressing forward because it’s the right thing to do,” Murphy said.

Times staff writer Elizabeth Douglass contributed to this report.

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