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U.S. Widens Global Crossing Inquiry
New York Times ^ | Tuesday, February 12, 2002 | By SIMON ROMERO

Posted on 02/11/2002 8:28:25 PM PST by JohnHuang2

February 12, 2002

U.S. Widens Global Crossing Inquiry

By SIMON ROMERO

The federal investigation of the accounting practices of Global Crossing, the troubled communications company, expanded yesterday into an inquiry on a type of financial transaction also used by Enron (news/quote) and many other companies.

The signal of the broader investigation was a subpoena that Qwest Communications (news/quote), the main local phone company in 14 Western states, said yesterday that it had received from the Securities and Exchange Commission.

The subpoena, received on Friday, ordered Qwest to hand over documents from transactions with Global Crossing involving the right to use each other's fiber optic networks to fill gaps in their own coverage. The S.E.C. wants to know whether those contracts in some cases were sham deals to inflate reported revenue.

Such long-term contracts were widely bought and sold during the Internet boom, as network operators like Qwest, Global Crossing and other communications upstarts tried to build, buy or borrow network capacity in anticipation of demand for data traffic — demand that seldom materialized to the extent forecast. A glut of unused network capacity, in fact, was behind the bankruptcy filings of Global Crossing and several other communications companies.

Enron, the energy company that evolved into a financial trading enterprise, was a large buyer and seller of such contracts before it filed for bankruptcy in December. Indeed, Enron's unraveling last year helped speed the collapse of the market for the contracts.

The S.E.C. investigation "gives us much-needed scrutiny into the legitimacy of contracts that could have allowed companies to look healthier on paper than they were in reality," said Susan Kalla, senior telecommunications analyst at Friedman, Billings & Ramsey.

Global Crossing's bankruptcy filing last month, involving $22 billion in reported assets, was the fourth- largest ever by an American company. (Enron's ranks as the largest.) Global Crossing came under investigation last week by the S.E.C. and the Federal Bureau of Investigation.

The S.E.C. began its inquiry after Roy Olofson, a former Global Crossing executive, questioned the way the company had booked its revenue in deals with Qwest and other companies. Mr. Olofson, a former vice president for finance, wrote in a letter last August to Global Crossing executives that the company had improperly inflated sales in deals of the type that the S.E.C. has asked Qwest to document.

The contents of Mr. Olofson's letter were made public by his lawyers last week.

According Mr. Olofson, Qwest and Global Crossing swapped about $100 million of capacity in each of the first two quarters of last year. But each company accounted for the deals differently even though they used the same outside auditor, Arthur Andersen — the accounting firm whose work for Enron is under scrutiny.

Mr. Olofson's lawyer, Brian C. Lysaght, said in a statement: "Global Crossing was giving the impression that it was generating cash revenues when, in actuality, these transactions did not increase the cash position of the company in any material sense."

Qwest sought yesterday to distance itself from the Global Crossing inquiry.

"We're cooperating with an investigation of Global Crossing, not of us," said Michael Tarpey, a Qwest spokesman. "We think we were squeaky clean on the issue of these swaps."

Yet Qwest had already come under scrutiny by financial analysts in recent months over its use of such transactions. Shares of Qwest fell 2.5 percent yesterday to $9.36 after it disclosed the S.E.C. request; the decrease extended a decline of 34 percent so far this year.

Global Crossing, which embarked in 1997 on an ambitious plan to extend its sole asset — a trans-Atlantic cable — into a 100,000-mile worldwide fiber optic network, often sought to acquire capacity on competitors' networks in North America that it said it needed to fill gaps in its system. Likewise, Qwest said it needed to buy capacity on Global Crossing's trans-Pacific and trans-Atlantic routes to meet its customers' needs.

Analysts said the S.E.C., which does not comment on active investigations, would presumably examine how Global Crossing and Qwest accounted for the transactions and how they disclosed the deals to investors. Also in question is whether the companies eventually even needed such long-term contracts at a time when network capacity was in ample supply. Another question is whether it was proper to record revenue for what were essentially barter deals in which no cash exchanged hands.

A Global Crossing spokeswoman, Tisha Kresler, said there was nothing unusual about the deals.

"It's common in the telecommunication industry for carriers to buy capacity from each other in order to provide service in an area where one company has routes or capacity that another needs in order to service customers," Ms. Kresler said. "That's our relationship with Qwest."

Qwest was primarily a long-haul network operator like Global Crossing before it used its soaring stock in 1999 to became a major local phone company by buying the regional Bell company U S West. It outbid Global Crossing to cinch that deal. But any hard feelings did not stop Qwest and Global Crossing from dealing with each other, and others, in the market for the communications contracts. That included other companies that have filed for bankruptcy protection, like 360networks (news/quote) of Canada.

Until around six months ago, these transactions, known in the telecommunications world as swaps of I.R.U.'s, or indefeasible rights of use, were especially widespread among operators of transoceanic and transcontinental networks, like Global Crossing and Qwest.

The deals, often covering terms of 15 to 25 years, allowed companies to book a purchase of capacity as a capital expense, thus avoiding an erosion of cash flow on their financial statements. They could record the sale of such contracts as an increase in revenue, even though no cash exchanged hands.

The market for these swaps began to decline last year as it became apparent that the industry had built more network capacity during the Internet boom than users needed. The decline hastened with the mounting troubles at Enron, whose active trading of shorter-term communications contracts had stimulated the market.

That meant trouble for Global Crossing, which was unable to show strong revenue growth without the contracts.

In part of his August 2001 letter, Mr. Olofson said Global Crossing's chief financial officer, Dan J. Cohrs, had sent an e-mail message to Thomas Casey, who was chief executive, and to other high-ranking executives, expressing concern about a news release that Qwest had issued, giving details of its I.R.U. agreements.

Mr. Cohrs was worried that the Qwest statement would draw unwanted attention to Global Crossing's I.R.U.'s, Mr. Olofson said, according to his lawyer.



TOPICS: Breaking News; News/Current Events
KEYWORDS: enronlist; globalcrossing
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To: Liz;Grampa Dave
The Most Influential People in Trade - World Trade Mag. 12/2000

Gary Winnick in the same list as Greenspan, Clinton, and Barshefsky.(and WWF's Vince McMahon)

81 posted on 02/14/2002 8:08:47 AM PST by d14truth
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To: Liz;Grampa Dave
You might recognize the name Charlene Barshefsky from the Ex-Im Bank list. Her 'bio' is right between those of Jackie Clegg(Mrs. Dodd) and William Daley. Looks like Charlene and Jackie's terms expired at the same time in 2001.

"CHARLENE BARSHEFSKY, U.S. Trade Representative, Ex Officio Board Member of Ex-Im Bank (March 1997-present)

Ms. Barshefsky became a member of the board upon her appointment as the U.S. Trade Representative in March 1997. You will remember her from the Presidential Treason 103. Ms. Barshefsky was/is a partner in another one of 'those' law firms, Steptoe & Johnson, a Department of Justice-registered foreign agent with offices in Moscow. Another clear conflict of interest - but, oh well...

Her proudest accomplishment should be noted: "With respect to market access and intellectual property rights with China, Ambassador [title comes with the job] Barshefsky was instrumental in achieving a comprehensive IPR enforcement agreement with China, and has been responsible for achieving the gradual, and steady opening of the Chinese market for priority U.S. exports. In addition, she has opened bilateral negotiations with China on services, including insurance and value-added telecommunications." (The comprehensive IPR enforcement agreement is about as useful as all the nonproliferation and test ban treaties the Communist dictatorship has signed and ignored. Wonder if Ms. Barshefsky has her computer loaded with pirated Microsoft products readily available today in Communist China for 1% of fair value?)"
*****
Suppose now there is a need to know about MR Barshefsky, should there be one.

82 posted on 02/14/2002 8:19:05 AM PST by d14truth
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To: Gothmog
Thanks for posting this incredible tidbit:

When this was first reported a couple of weeks ago the news articles also reported that Sen. Jeff Bingaman's (D-NM) wife Anne Bingaman was paid a large amount of money to lobby for the company. Anne Bingaman was the no.2 person at the DOJ handling anti-trust issues during the Clinton admionistration.

IMHO, that is where some scandal will be uncovered. Former Clinton official and wife of Dem Senator turning around and using her connections to help GC on anti-trust issues."

This whole thing gets messier each day. Thanks for this trip back in history. Data like this is never covered by the left wing maggot infested media.

83 posted on 02/14/2002 8:20:31 AM PST by Grampa Dave
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To: Grampa Dave;Liz;PhiKapMom;Uncle Bill;Brian Mosely
I should have guessed Ms Barshefky was married to a 'Clinton Insider' with a different last name, former deputy solicitor with the Interior Department, Edward Cohen--

WALL STREET JOURNAL - September 6, 2000

"Trade Chief Recuses Herself on Issues of Japanese Autos to Avoid Conflict…(Helene Cooper) U.S. Trade Representative Charlene Barshefsky's husband has left his job with the Clinton administration to become Honda Motor Co.'s chief representative in Washington, forcing Barshefsky to relinquish oversight of Japan auto-trade issues. Edward Cohen, formerly deputy solicitor with the Interior Department, began work yesterday as the Japanese automaker's vice president of government relations and industry. His move comes as the U.S. and Japan resume contentious negotiations on access to Japan's car and car parts market. Barshefsky said there is no conflict of interest since she has recused herself from the Japanese auto negotiations. "In order to ensure no actual or perceived conflict of interest, my husband has recused himself from all trade matters" at Honda while she is in office, Barshefsky said. "And I have recused myself from all Japanese auto matters." AUTO.COM"
******
Notice that even in the Wall Street Journal, you have to be reading quite closely to get the husband/wife connection due to descriptors and name separation in the sentences.

84 posted on 02/14/2002 8:31:59 AM PST by d14truth
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To: d14truth
Your comment, "Notice that even in the Wall Street Journal, you have to be reading quite closely to get the husband/wife connection due to descriptors and name separation in the sentences."

This is what is so upsetting as you, Liz and others dig through these messes and discover that many key decision makers are married to a demonicRat senator. The data is there, but if you don't know the maiden names or in some cases the husband's name of the female senator, you don't realize the potential problem of conflicts of interest.

85 posted on 02/14/2002 8:45:17 AM PST by Grampa Dave
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To: Liz;Grampa Dave
Letter to Edward B. Cohen - January 2000

aka Charlene Barshefsky's husband???

Wonder if content of this, among other things, led to his leaving the Interior Dept. later the same year.

Quite a letter showing awareness of US working conditions and 'centrist union' manipulation of workers in the US.--
*****
Brief excerpt of letter written by Richard A. Pierce, Executive Director of SGMA--

"It is simply to observe that the federal effort seems to be driven by domestic politics and certain labor union constituents of the administration, rather than concern for the welfare of our workers."

86 posted on 02/14/2002 8:57:59 AM PST by d14truth
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To: d14truth
Is Mr Pierce still alive today after making this comment about demonicRat Union thug leaders and the Clintoon administration:

Brief excerpt of letter written by Richard A. Pierce, Executive Director of SGMA--

"It is simply to observe that the federal effort seems to be driven by domestic politics and certain labor union constituents of the administration, rather than concern for the welfare of our workers."

87 posted on 02/14/2002 9:01:03 AM PST by Grampa Dave
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To: d14truth
Quite a letter......

I'll say....no PC garbage here......

88 posted on 02/14/2002 10:17:01 AM PST by Liz
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To: d14truth
"Trade Chief Recuses Herself on Issues of Japanese Autos to Avoid Conflict......

HAHAHAHAHAHAHAHA. Funniest thing I've read today.
I'm so impressed (barf). What integrity. What decency. What
sincere concern for the taxpayers. What high morals.

What a lot of BS..........

89 posted on 02/14/2002 10:26:00 AM PST by Liz
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To: Grampa Dave
I'm guessing from this that he is alive and well(and spending a lot of time in court) Apparently being UN-PC can get you a subpoena and considerable grief.

GARMENT LAWSUIT MOVED TO SAIPAN; HAWAI‘I COURT'S DECISION LIKELY TO SPEED UP LITIGATION

90 posted on 02/14/2002 10:26:03 AM PST by d14truth
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To: Grampa Dave;Liz
Richard A. Pierce--

"Prison labor in U.S. garment industry exposed by L.A. Times"

"Saipan Garment Manufacturers Association Executive Director Richard A. Pierce said, "You have to wonder how Congressman [George] Miller can bear this exploitation of fellow human beings right in his own backyard as well as watching jobs being taken away from union members. It’s certainly time for the US Department of Labor and the human rights groups to take a close look at this situation.""

I think I like this guy.

91 posted on 02/14/2002 10:47:53 AM PST by d14truth
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To: d14truth
I do like this man.

I love it when someone uses a ball bat on the hard commie head of Miller. What a phoney! He pretends to be a caring loving fellow commie/socialist while he is in for the money big time!

92 posted on 02/14/2002 10:58:59 AM PST by Grampa Dave
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To: Bayou City;Grampa Dave;Liz;Dick Bachert
Weekend 'bump' for the PARTY of Clinton and the 'Global (Double) Crossing' group.
93 posted on 02/15/2002 11:45:09 AM PST by d14truth
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To: d14truth
Got it!!!!
94 posted on 02/15/2002 11:58:04 AM PST by Liz
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To: lexington minuteman 1775
One of the older Global Crossing threads with many 'links'
95 posted on 02/15/2002 3:39:28 PM PST by d14truth
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To: oldironsides
This thread starts discussing Senator and Mrs. Dodd's 'conflicts of interest'(actually, NO conflict in their interests) in reply #52.
96 posted on 02/15/2002 3:45:05 PM PST by d14truth
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To: Cincinatus' wife;white trash redneck
More Global (Double) Crossing
97 posted on 02/16/2002 9:55:22 AM PST by d14truth
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To: d14truth
Thanks for the ping!
98 posted on 02/17/2002 12:37:03 AM PST by Cincinatus' Wife
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To: joyce11111
If you look into Cisco you will find that it actually makes things that are sold and shipped and bring a profit.

Unlike these two (Enron and Global Crossing) it doesn't have debt, but it has a huge amount cash.

99 posted on 02/17/2002 12:45:42 AM PST by edwin hubble
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To: kcvl;Liz;Grampa Dave;Dog
I thought your statement would look good in cross-reference to the Clinton 'Fete' guest list--

"TIME's investigative correspondent Michael Weisskopf also reports "there is no forgetting the coziness of Global Crossing's co-chairman, Lodwrick Cook, and the Bush family.""

Looks like 'Cook was Clinton cozy' as well, see reply #54.

Hope you all don't mind the repeated 'pings'. Sometimes the 'new' information needs to be reassimilated with the 'old'.

100 posted on 02/19/2002 2:36:32 PM PST by d14truth
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