FBI launches Global Crossing probe

Global Crossing: Under investigation

The Federal Bureau of Investigation has opened an enquiry into Global Crossing, the bankrupt Bermuda-based telecommunications company, according to reports.

The FBI's investigation will include the failed telecoms company's accounting procedures, the Reuters news agency and the USA Today newspaper reported.

A Global Crossing spokeswoman declined to comment, but said that it was company policy to co-operate fully with all investigations.

News of the FBI probe comes amid heightened investor sensitivity to corporate accounting standards in the wake of the Enron scandal.

Earlier this week, the Securities and Exchange Commission, the US stock market regulator, launched its own enquiry into Global Crossing's collapse.

The investigation followed claims by former Global Crossing vice-president, Roy Olofson, that the firm had used accounting techniques which artificially inflated profits.

Global Crossing has said the claims were without merit.

Concerns over the Global Crossing case were also heightened after documents filed on Friday said that the firm agreed in October to eliminate the $10m outstanding of a $15m loan made to chief executive John Legere.

The firm also eased terms on an $8m loan made to former chief executive Thomas Casey, the documents, filed by Global Crossing itself, said.

The $25bn company, which filed for bankruptcy protection on 28 January, ranks as the fourth biggest ever US corporate failure.

Post-Enron jitters

Revelations over irregular accounting procedures at Enron during Congressional hearings earlier this week have undermined investor confidence in corporate financial statements, triggering a dip in share prices.

Enron collapsed late last year, leaving thousands of investors and creditors out of pocket, and wiping out many former employees' retirement savings.

Enron's auditor Andersen, heavily criticised for not spotting irregularities in the energy giant's books, also signed off Global Crossing's accounts.

Debt burden

Global Crossing, formed in 1999 from a merger between a Bermuda-based fibre optics cable specialist and a local US telecoms firm, was regarded as one of the most promising of the new generation of telecommunications providers that sprang up in the late 1990s.

The company's stock market valuation at one point rose as high as $75bn.

But the company built up heavy debts rolling out its high-speed fibre optic cable network, and was hard-hit by a slowdown in global telecommunications spending over the last two years.