Inquiry on Shredding Claims

Global Crossing Ltd. said Wednesday that federal prosecutors in Los Angeles will investigate allegations that two employees shredded documents at the Madison, N.J., offices of the bankrupt fiber-optic network builder after government investigations began.

Global Crossing has said that documents unrelated to government and securities fraud lawsuits were destroyed at five of its U.S. and Canadian offices, but not at its U.S. headquarters. It denied that any sensitive documents were destroyed at any of its offices.

Federal authorities, including the Securities and Exchange Commission, are looking into the Bermuda-based company’s accounting practices as part of ongoing investigations into Global Crossing’s collapse in January.

A shareholder in one of 60 securities fraud suits uncovered allegations from a former employee and a current one that they heard a shredding machine operating behind a closed storage room door. The workers said they never saw any shredding nor any shredded material, though one said she saw a small shredding machine in the room.

The room is on the third floor near the office of Joseph Perrone, the finance chief who directed the aggressive accounting methods at the heart of the investigations and lawsuits. One of those alleged to have destroyed documents is his son-in-law, Steve Scro. Scro has denied that he shredded any materials.

But federal prosecutors are acting in the aftermath of reports of vast shredding at bankrupt Enron Corp. and its auditor, Arthur Andersen.

Global Crossing and the shareholder, the Ohio State Retirement System, have resolved the pension fund’s concerns about protecting documents.

James S. Granelli