Posted on 07/05/2002 3:49:28 PM PDT by Libloather
DOJ Probing Global Crossing Shredding
Wed Jul 3, 3:04 PM ET
By Siobhan Kennedy
NEW YORK (Reuters) - The U.S Justice Department, already investigating claims of improper accounting at Global Crossing Ltd. , is now probing claims of document shredding there, the bankrupt telecoms company said on Wednesday.
Global Crossing said the U.S. Attorney in Los Angeles notified it that the Federal Bureau of Investigation has begun investigating the shredding allegations, which first surfaced in court documents late last month.
A spokesman for the U.S. Attorney declined to comment on the probe.
The allegations came from a current Global Crossing employee and were brought to light on June 10 by the Ohio State Retirement Systems pension fund, which lost $116 million between 1999 and Global Crossing's demise earlier this year.
Global Crossing in January filed the fourth largest U.S bankruptcy, buckling under $12.4 billion in debt, stiff competition and a glut of capacity in telecommunications.
Allegations of corporations shredding important documents have become more frequent amid recent accounting scandals.
Auditor Andersen [ANDR.UL] was convicted of impeding the probe of the collapse of energy giant Enron Corp. by shredding records after the U.S. Securities and Exchange Commission ( news - web sites) began its investigation.
According to court filings, the receptionist at Global Crossing's New Jersey offices, Cathleen Kicak, said in a sworn affidavit that she saw two employees leave a storage room that housed a shredding machine. Kicak did not see the employees shredding documents, but said she heard the machine operating just before they left.
COMPANY DENIES ALLEGATIONS
The U.S. Bankruptcy Court in Manhattan initially sealed the court documents pending a probe by the parties, but allowed them to be unsealed on June 21 after Global Crossing said it settled the matter with Ohio State Retirement Systems.
At that time, Global Crossing said it had conducted an investigation and concluded there was no merit to the allegations. It did say it had found isolated incidents of shredding, but none of those documents were relevant to pending litigation or governmental investigations.
Global Crossing also said that on June 17 it sent a reminder to employees of their obligation to preserve company documents. The order initially went out on Feb. 7, a day after Global Crossing received its initial subpoena from the Securities and Exchange Commission over alleged accounting irregularities.
On Wednesday, Global Crossing repeated that the shredding allegations were without merit.
The company also said it intends to co-operate fully "in connection with any inquiries that may arise in connection with recent allegations of document shredding."
Attorneys in a shareholder suit against Global Crossing are preparing for a July 18 hearing in Rhode Island to determine if the case will be heard in U.S. District Court in New York or Los Angeles, and who will be the lead plaintiff.
The most likely lead plaintiff is the Ohio State Retirement System because of standards set by federal securities law that dictate that the largest institutional investor be accorded that status, one lawyer involved in the case said.
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