Attention turning to Global Crossing

Interest is building on Capitol Hill for an investigation of the business and accounting practices that steered telecommunications pioneer Global Crossing Ltd. into bankruptcy court, stranding workers and investors with worthless stock while company executives reaped huge financial rewards.

Since Global Crossing filed for bankruptcy three weeks ago, shareholders have accused the company of using questionable accounting techniques to overstate revenue, workers complained that they were barred from selling stock in their 401(k)s as share prices continued to fall, and former employees have fretted about the sudden cessation of their severance pay.

“It appears to be inevitable we will take a look at them,” said Ken Johnson, a spokesman for the chairman of the House Energy and Commerce Committee, Rep. Billy Tauzin (R-La.).

But in Washington, the plight of Global Crossing has been overshadowed by investigations of energy trading giant Enron Corp.’s even more stunning financial meltdown.

Now that is starting to change. Staffers on the Commerce Committee, home to the subcommittee on telecommunications and the Internet, said Wednesday that a Global Crossing probe could begin within a few weeks.

“They are on our radar screen, even though we are devoting a tremendous amount of time to Enron,” said a spokeswoman for Rep. John Dingell (D-Mich.), the committee’s ranking Democrat.

Other congressional panels may have an interest in the company as well. Last week, Rep. Louise Slaughter (D-N.Y.) asked the House Committee on Financial Services to investigate Global Crossing’s aggressive accounting practices. As the telecom market fizzled, the company booked revenue by trading capacity on its fiber-optic network with other firms.

Slaughter also requested that the Committee on Education and the Workforce look into Global Crossing’s decision to prevent employees from accessing their

401(k) accounts, which included company stock, in the weeks leading up to the bankruptcy filing. The restriction arose in December and January because the company switched the administrator for its 401(k) plan, automatically freezing workers’ accounts. The practice is legal, but the timing of the so-called lockdown has raised suspicions.

Shares quickly plummeted

However, by the time the lockdown began, Global Crossing’s shares were trading for less than a dollar. They hit an all-time high of $65.77 in 1999.

Some observers say partisan politics is behind the newfound interest in Global Crossing. The 5-year-old company, which is based in Bermuda but maintained executive offices in Beverly Hills, quickly became one of Washington ‘s most generous political donors. Of the nearly $2.8 million in soft money the company contributed over the years, 55 percent of it went to Democrats.

Democratic National Committee Chairman Terry McAuliffe was an early investor in the company, and he pocketed nearly $18 million when he sold the bulk of his shares in 1999, when the stock was riding high. William Cohen, President Clinton ‘s secretary of defense, currently serves on Global Crossing’s board.

Potential political distress

Those ties could give Republicans an opportunity to distress Democrats as much as the Enron scandal has embarrassed the GOP.

“A lot of people have pointed out that Terry McAuliffe got a sweetheart deal … and politicians always feel a need to embarrass their foes,” said Erick Gustafson, director of federal policy for Citizens for a Sound Economy, a conservative Washington watchdog group headed by C. Boyden Gray, former President George Bush’s White House lawyer.

Johnson, Tauzin’s spokesman, hinted that if congressional Democrats try to mine political capital out of Enron, they could get their comeuppance with Global Crossing.

Donations were widespread

“We believe that Enron is a business scandal, not a political scandal,” he said. “But if certain Democrats want to continue to try to politicize the Enron scandal, there’s always the possibility we could turn the tables on them in a Global Crossing investigation.”

But like Enron, Global Crossing spread its money around Washington liberally, giving money to 39 member of the House and 33 Senators.

Since 1999, the company and its employees have given $2,000 in soft money to Tauzin and $1,000 to Dingell, according to the nonpartisan Center for Responsive Politics. Slaughter received $1,500 in Global Crossing soft money.

Still, Slaughter and other Democrats are eager to scrutinize the company, motivated in part by the inevitable media visibility such a probe would bring, and by good old-fashioned outrage from constituents.

“I’m a Democrat in good standing,” said Slaughter, whose Rochester, N.Y., district is home to 800 Global Crossing employees. “If Global Crossing needs investigating, it needs investigating.”