BusinessCompany NewsEnron committee looks at Global Crossing

Enron committee looks at Global Crossing

A US House of Representatives committee, which recently reviewed accounting practices at bankrupt energy giant Enron, is set to examine whether network operator Global Crossing engaged in questionable accounting practices.

The company, which built its own $12bn international fibre-optic network last year, filed for Chapter 11 bankruptcy protection in January.

In a letter this week, the heads of the House Energy and Commerce committee asked Global Crossing to provide records, descriptions, and definitions related to the company’s business processes. The committee wants the documents by 26 March.

The committee is the same group that recently reviewed accounting practices that led to the bankruptcy of energy giant Enron, and it noted that both Enron and Global Crossing used the same accounting firm, Arthur Andersen LLP.

Global Crossing is already facing an investigation by the US Securities and Exchange Commission regarding its accounting practices.

Among the documents requested by the committee are descriptions of capacity swaps with other carriers and how Global Crossing accounted for them, as well as all records concerning accounting and financial reporting matters since 1998.

The news comes just as the company has embarked on moves to stay alive by slashing its operating costs. That means cutting its service offerings through reduced expenses and staff. In addition, 71 Global Crossing offices are set to close.

Reduced services alone could be enough for customers to go elsewhere but investigations at the Senate and the SEC are also likely to be damaging.

‘When the SEC begins an investigation on whether the company inflated its revenue figures on its financial statements, customers, investors, and the market tend to remember it,’ said Kate Gerwig, principal analyst at CurrentAnalysis

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