Report: Federal Prosecutors Close Criminal Global Crossing ProbeDec 24, 2002 | AP
Federal prosecutors have decided not to file criminal charges against Global Crossing Ltd., Chairman Gary Winnick or any of its other executives over the company's aggressive accounting practices, a newspaper reported Tuesday.
The U.S. attorney's office in Los Angeles lacked enough evidence to show that executives at the telecommunications company had misallocated costs or had obstructed justice by shredding sensitive documents, according to the Los Angeles Times. The newspaper quoted anonymous sources close to the investigation.
"While there was a great deal of smoke, prosecutors obviously concluded the evidence was not sufficient to bring a case," said Robert Mintz, a former federal prosecutor in Newark, N.J., who has tracked the Global Crossing situation. "These cases, from the outset, are extremely difficult to make because they often fall into gray areas where overt criminality is difficult to find."
Calls seeking comment from the U.S. Attorney's Office in Los Angeles and Global Crossing were not immediately returned.
Launched in 1997, Global Crossing spent $15 billion building the world's most extensive fiber-optic network. But with the economic slowdown, it cut thousands of jobs, closed 71 offices and saw its stock fall from a high of more than $60 a share to 30 cents before its bankruptcy filing in January.
The company claimed $22.4 billion in assets when it filed for bankruptcy. Investors and company employees whose retirement savings were invested in company stock lost billions of dollars in the collapse.
The end of the criminal investigation doesn't halt an inquiry by the Securities and Exchange Commission or ongoing civil litigation by investors.
"It doesn't affect our case," said Sidney S. Liebesman, whose Delaware law firm is lead counsel in about five dozen securities fraud class actions that have been consolidated for trial in federal court in New York.
The criminal investigation was launched on the strength of allegations from Roy Olofson, a former Global Crossing vice president of finance. He told a House Energy and Commerce subcommittee in September that the company entered into more than a dozen deals in early 2001 designed to overstate revenue and make the company appear financially sound.