Global Ex-Official to Break Silence
A former finance executive at Global Crossing Ltd. will break his long silence today to describe to a congressional panel how he raised concerns about the company’s accounting in mid-2001, only to be ignored, fired and labeled an extortionist by company executives.
Roy Olofson, who worked in Beverly Hills as the firm’s vice president of finance, wrote a five-page letter more than a year ago to Global Crossing’s top attorney detailing what he considered deceptive accounting practices and conflicts of interest at auditor Arthur Andersen.
That letter, made public by The Times two days after Global Crossing’s bankruptcy filing Jan. 28, was the first sign of possible fraud at the company. The Securities and Exchange Commission, the Justice Department and others subsequently opened investigations into the telecommunications company’s financial reporting and into possibly related stock sales by top executives.
Olofson, who has sued Global Crossing, will reiterate his allegations in testimony before the House Energy and Commerce Committee’s oversight and investigations panel, according to Paul Murphy, Olofson’s attorney. He will be joined by current and former employees of Global Crossing and rival Qwest Communications International Inc.
Most of the people appearing before the committee today are considered “friendly” witnesses expected to provide evidence that the two firms used sham fiber-optic capacity deals to boost financial results in early 2001, when the industry was showing signs of a protracted slump.
Congressional officials hope to gather ammunition for a separate hearing Oct. 1, when lawmakers plan to question top executives from Global Crossing and Qwest about the bookkeeping moves and whether they were designed to hide their respective companies’ deteriorating condition while the executives sold shares.
“These companies manipulated their earnings to the detriment of the public and to the detriment of their employees, who in some cases lost their jobs and their pensions and their dreams and their aspirations,” said Rep. James C. Greenwood (R-Pa.), who chairs the oversight and investigations subcommittee.
Global Crossing Chairman Gary Winnick, who has led the company since its founding in 1997, sold nearly 10 million shares of his company stock for $124 million in May 2001.
On Monday, Qwest conceded that its accounting was flawed and that it would restate $950 million in revenue and costs related to capacity swaps with other telecommunications companies. Global Crossing, citing ongoing investigations, has not announced plans to restate any results.
The current and former Global Crossing employees set to testify today include Olofson; Patrick Joggerst, former president of carrier sales; Jackie Armstrong, an attorney; and Robin Wright, former vice president of carrier sales.
Qwest representatives include Executive Vice President Robin Szeliga; Greg Casey, former executive vice president of wholesale markets; Susan Chase, vice president of international wholesale markets; and Kym Smiley, former director of strategic negotiations.
Ken Floyd, director of North American sales for New York-based Flag Telecom, also will testify. Flag is one of several firms that completed capacity deals with Global Crossing in early 2001.
In testimony before the committee, company witnesses are expected to explain internal e-mails and other documents that discuss side deals between carriers and criticize certain network capacity sales as “crazy deals” that have no business justification.
Greenwood called today’s hearing a prelude to next week’s appearances by top executives.
The committee has either subpoenaed or invited six current and former executives, including, from Global Crossing: Winnick, Chief Executive John Legere, Executive Vice President of Finance Joseph Perrone and former general counsel James Gorton, who received Olofson’s letter last year. Qwest President Afshin Mohebbi and former Qwest CEO Joe Nacchio also are scheduled to appear Oct. 1.
