Executives at Global Crossing raised concerns about accounting at the company as early as August 2000, investigators at the House Commerce Committee said today, citing memorandums obtained from the company.
In documents released by the committee, which is investigating the way Global Crossing accounted for transactions with Qwest Communications International and other companies, Global Crossing executives said they were concerned that the company had used the transactions to make the company appear in better financial shape than it was.
In a memorandum dated Aug. 30, 2000, for example, Robin Wright, a Global Crossing executive, said that a capacity swap number “ends up being the plug number in order to meet” Wall Street expectations. In a swap, a company sells the use of its network while buying similar capacity on a customer’s lines.
“These documents clearly spell out some of the concerns we have about these companies’ engaging in phony transactions simply to meet Wall Street expectations,” said Representative James C. Greenwood, Republican of Pennsylvania and chairman of the committee’s investigations subcommittee.
The House, the Securities and Exchange Commission, and the Justice Department are trying to determine whether Global Crossing improperly booked revenue from the agreements and misled investors in the months before it filed for bankruptcy protection in January.
Global Crossing said it was cooperating with the committee “to address their concerns and to provide them context for the materials that they have been reviewing, for it is only within this context that these materials and the related transactions can be fully understood.”