Bankrupt telecom service provider Global Crossing confirmed on Friday the financial regulator is investigating accounting allegations made by ex-employee Roy Olofson in August last year.
Yesterday another operator, Qwest saw its stock price lose a quarter of its value after it admitted it has been asked to provide the SEC with documents relating to its dealings with Global Crossing. Both companies say they will cooperate with the financial regulator.
Qwest’s own accounts are not currently under investigation but it has made capacity purchase and sale agreements with Global Crossing in the past. These types of complex agreements are not new to the telecom world but Olofson alleges that Global Crossing’s accounting of capacity deals was incorrect.
Global Crossing has said that it did not show Olofson’s letter to Andersen until the end of January so it is unclear if the telco will become yet another disastrous public relations association for Enron’s former accountant. One commentator said yesterday that Global Crossing’s extravagant CEO employment terms already raised red flags in 2000.
The bankrupt company, the fourth biggest collapse in US corporate history, is already under independent investigation by an outside accountant at the request of Andersen, while the FBI probes its accounting procedures in addition to the SEC investigation.
Meanwhile, the lawyer of former Enron CEO Ken Lay said that he is planning to claim protection under the Fifth Amendment at a hearing on Capitol Hill today.
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