- The Washington Times - Wednesday, February 13, 2002

The Global Crossing vice president whose whistleblowing triggered two federal investigations of that telecommunications giant's stock collapse says pessimistic news about last year's earnings outlook was delayed to shield the insider trading of Global Chairman Gary Winnick from criticism.
Roy Olofson said through attorney Brian C. Lysaght that on June 21 Global Chief Financial Officer Dan J. Cohrs refused Mr. Olofson's request to warn shareholders that the outlook was grim for the rest of 2001.
"Cohrs replied that he could not because the chairman had just sold approximately 10 million shares of stock for a price in excess of $124 million," Mr. Lysaght said, which Mr. Cohrs feared would make it look as if the chairman was profiting from bad news his company had not made public.
"The sale was completed on May 23, 2001," Mr. Lysaght said in elaborating on the last of Mr. Winnick's stock trades, which reportedly totaled $734 million.
Mr. Olofson, who was Global's vice president for finance for almost four years, also charges that Arthur Andersen LLP accountants had a "stark conflict of interest" and permitted improper bookkeeping entries that misled investors about Global's sales.
Mr. Olofson, 62, was retroactively fired as of Nov. 30, five months after complaining to bosses about unorthodox accounting of cash swaps with other companies that were booked as sales. He now connects that charge to the fact that Andersen's senior audit partner for Global's books, Joseph P. Perrone, was lured to the company payroll in the spring of 2000 on a "very rich" employment contract.
"These are sham transactions," Mr. Lysaght quoted his client as saying when he accused Mr. Perrone of having a pivotal role in the accounting strategy.
"The watchdog all of a sudden becomes the watched, and you have to be nice to Global Crossing to get that sort of contract. It is necessary that the full story be told," Mr. Lysaght told The Washington Times.
"Andersen suffered from a stark conflict of interest because Andersen's former partner in charge of auditing Global Crossing was now the front person responsible for Global Crossing's audit relationship with Andersen," Mr. Lysaght said.
That charge about Mr. Perrone is new and appears to contradict Mr. Olofson's Aug. 6 letter asking Global general counsel James Gorton to investigate aggressive accounting methods but not to involve Mr. Perrone. That letter was given to FBI investigators and the Securities and Exchange Commission after Global went into bankruptcy court Jan. 28 to file a reorganization plan in the nation's fourth-largest bankruptcy case. It listed debts of $12.4 billion and assets of $22.5 billion.
Democratic Rep. Louise M. Slaughter told union workers in Rochester, N.Y., on Monday, "I'm meeting with my colleagues in the House to make the Global Crossing situation part of the investigations now going on into Enron."
In airing the new charges, Mr. Lysaght said, "We will cooperate fully with the SEC and any other investigative agencies, including the FBI, if necessary, to ensure that the truth about these transactions is fully aired."
A Global official said Mr. Perrone couldn't be "working for both of us at the same time." Andersen spokesman Patrick Dorton agreed, but neither he nor Global spokeswoman Becky Yeamans would confirm that Mr. Olofson's new position is at odds with earlier internal statements.
"At all times, our auditors acted in a professional and independent manner," Mr. Dorton said.
Miss Yeamans said the SEC asked about Mr. Perrone's role shortly after his hiring in May 2000. She said the routine inquiry was related to a stock offering. The SEC asked whether the auditing firm's independence was "impaired" by hiring Andersen's point man on the account. Miss Yeamans said the SEC decided Andersen retained its independence.
Mr. Olofson said Global entered transactions with its customers that claimed almost $1 billion in sales that the whistleblower says have "no economic substance," because both sides exchanged offsetting checks or promises of future availability of service. He says Global's quarterly reports falsely inflated stock prices and encouraged investors.
Mr. Olofson contends that 13 of the 18 largest transactions "occurred on the last day or two of the quarter with the parties exchanging identical or substantially similar amounts of cash," Mr. Lysaght said.
Global spokesmen deny the charge involving Mr. Winnick's stock sale. In an unsigned written statement, Global said Mr. Olofson is making accusations to in effect extort Global Crossing for "an up-front multimillion-dollar payment" and five years of six-figure payments.
"Whether Roy Olofson is the Virgin Mary or Lucifer, that does not change one iota whether Global Crossing's financial statements are legitimate or illegitimate," Mr. Lysaght responded in the telephone interview from his Santa Monica, Calif., office.
The lawyer denied his client went public to avenge Global's action in reneging on a $700,000 settlement negotiated in December for his termination. Mr. Lysaght says the company has tried to demonize Mr. Olofson since it received the draft of a "wrongful termination" lawsuit he plans to file.
Although Mr. Olofson outlined two dozen transactions between Global and other firms, including two deals recorded for $200 million each, the only other company identified as a participant was Qwest, the Denver-based telephone company for eight Western states.
Qwest received an SEC subpoena Monday for documents related to those dealings with Global. Qwest spokesman Michael Tarpey insisted the government is investigating Global, not Qwest, which accounted for the transactions differently.
"We think we were squeaky clean on the issue of these swaps," Mr. Tarpey said.
Andersen which is revamping policies allowing it to be both consultant and auditor for Enron exercised both functions at Global and Qwest.
Global says no further action was taken about the Olofson letter because Andersen accountants reviewed the statements, and the company disclosed in press releases how it arrived at the numbers. Global did not give the letter to Andersen until Jan. 29, almost six months after receiving it.
Mr. Olofson's charges focus on the six months beginning Jan. 1, 2001, during which he was hospitalized for treatment of lung cancer. His attorney denies Mr. Olofson participated in the practice called "round-tripping" when he supervised accounting or shared in massive stock profits.
"No, once Perrone got in he was out," Mr. Lysaght said, referring to Mr. Perrone's hiring in May 2000.
Asked whether Mr. Olofson reaped profits from inside knowledge, as Mr. Winnick and other associates are said to have done, Mr. Lysaght said, "Whatever he has is peanuts, profits worth on the order of $50,000 to $100,000 at most."
Mr. Lysaght lists 18 large transactions that employed "round-tripping," when two companies exchange offsetting services or cash of equal value. He said recording such transactions as new sales is misleading and not sanctioned by guidelines in Generally Accepted Accounting Standards, the accounting bible.
Mr. Olofson identified three "round-tripping" transactions he called worthless that were booked at $323 million in the first three months of 2001 and $364.5 million from 11 round-trip transactions in the second quarter.

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