- The Washington Times - Friday, March 22, 2002

Global Crossing Ltd. executives yesterday denied that the fiber-optics company misled investors as Enron Corp. has been accused of by bloating its revenue statements even as it was falling deeply into debt and bankruptcy.
"Global Crossing is no Enron," said Chief Executive John G. Legere, contending in testimony before the House Financial Services Committee that the similarities are only "superficial," from questions about accounting practices and the companies' auditor, Arthur Andersen LLP, to the unloading of stock by executives before the stock collapsed last year.
Mr. Legere and the Bermuda-based company's chief financial officer, Dan J. Cohrs, did concede, however, that the Securities and Exchange Commission and Justice Department are looking into those executive stock sales, as well as the "pro forma" revenue reports the company provided investors touting its cash income from network swap arrangements.
Noting the meteoric rise and even more rapid fall of Global Crossing's stock price from a high of $64.25 in May 1999, Mr. Legere asserted that "many investors profited greatly. Unfortunately but as is always the case many investors also lost money." Even before the company filed for bankruptcy in January, he said, the stock was worth only pennies a share.
Unlike the Enron hearings, which have continued almost nonstop since the beginning of the year, Congress' first hearing on Global Crossing was sparsely attended, attracted fewer reporters and did not feature the tough questioning aimed at Enron executives.
More hearings are likely, however. The House Energy and Commerce Committee, the lead panel investigating Enron, recently raised serious questions about Global's accounting practices and questioned whether it was even a legitimate company in its short five years of operation.
Mr. Legere yesterday energetically disputed charges that the company was a "paper tiger" with no real assets that simply deluded investors into buying its stock.
"Global Crossing built and owns the world's most advanced fiber-optic network, spanning the globe and touching five continents," he said. "It is a very real asset," which has enabled the company to serve 85,000 customers and carried the news feeds for the winter Olympic Games in Salt Lake City, among other accomplishments, he said.
One major customer Global Crossing continues to cultivate even as it reorganizes is the Defense Department. The Pentagon initially awarded a $400 million contract to the company in the summer to provide fast and secure Internet service, but then backed out of the deal when questions arose about the company's financial viability.
"They've made it clear we have an inside track" to get the contract back again, Mr. Legere said. "We just have to prove we have the economic wherewithal."
On the questionable swap arrangements, Mr. Legere said the company booked the deals conservatively in its financial statements, taking credit for income only as it comes in under the 20-year network lease arrangments. But he conceded that the company in its "pro forma" releases for investors emphasized the large first-year cash infusions it received from the deals.
The reason the company touted the cash it got from the swaps, although contrary to accepted accounting practice, is that it underscored the company's ability to service the massive debts it accumulated building its 100,000-mile, worldwide network, Mr. Cohrs said.
Legislators and analysts said the company's portrayal of large cash inflows from the deals misled investors into believing the company was far more profitable and viable than it actually was.
"These pro-forma statements provide an easy opportunity to 'cook the books,'" said Rep. Sue W. Kelly, New York Republican, noting that Global Crossing made its earnings appear 50 percent, or $531 million, higher than they actually were.
"By all accounts, Global Crossing was a winner, but now we know that it was actually a financial time bomb" for investors, she said.


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