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Global Crossing Chairman Subpoenaed

Sep 12, 2002 | AP

A House panel issued a subpoena Thursday for testimony by the chairman of bankrupt Global Crossing and expanded its investigation to include Western phone company Qwest Communications and other companies.

The House Energy and Commerce Committee served the subpoena on Global Crossing Chairman Gary Winnick to appear at a hearing on Sept. 24, committee spokesman Ken Johnson said.

Also subpoenaed were Jim Gorton, former general counsel of Global Crossing, and Greg Casey, a former executive vice president of Qwest, according to Johnson. The three have refused to be interviewed by committee investigators, he said.

In addition, he said, the panel's inquiry has been expanded to include Qwest and its deals with Global Crossing to swap network capacity.

The Justice Department and the Securities and Exchange Commission are investigating Global Crossing's accounting. Denver-based Qwest, the biggest provider of local phone service in 14 Western states, has acknowledged major accounting errors and is under investigation by the SEC.

The committee also is looking into similar deals Global Crossing had with other telecom companies, Johnson said.

"We're concerned that these capacity swaps were merely sham transactions meant to artificially increase revenue and mislead investors," said Rep. Jim Greenwood ( news, bio, voting record), R-Pa., chairman of the panel's investigative subcommittee.

Attorneys for Gorton and Casey could not immediately be located and spokesmen for Qwest didn't immediately return a telephone call seeking comment.

Winnick's attorney, Gary Naftalis, said his client "will respond in an appropriate manner" to the subpoena.

Winnick "continues to cooperate with this and other inquiries by making available all relevant documents," Naftalis said in a statement. "There is absolutely not a shred of evidence that Gary Winnick has done anything improper. All records and reports demonstrate that Gary acted at all times legally, ethically and honorably."

Johnson said "we would not be surprised" if Winnick invoked his Fifth Amendment privilege and refused to answer lawmakers' questions.

Based on interviews with other company officials, Winnick "appears to have been a lot more involved in the day-to-day operations of the company than he has admitted," Johnson said.

The committee released a March 21 e-mail from what Johnson said was a former Qwest manager to a former senior executive that cites accounting violations. Their names are deleted.

"I have some information about violations that Qwest has committed in the area of accounting," the manager wrote. "If Qwest reduces managers' salaries, I will turn these documents over to the SEC ... The resulting fallout from these 'smoking guns' will ... cost Qwest more than it could save by reducing managers' salaries."

Among other things, the committee has been investigating whether Winnick, who founded Global Crossing, acted to inflate the fiber optic giant's balance sheet before selling large chunks of its stock.

Winnick sold $734 million in stock before the company filed for bankruptcy protection in January. Two Asian companies bought Global Crossing out of bankruptcy earlier this month for $250 million, a fraction of the $22 billion in assets the company listed in its bankruptcy court filing.

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