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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.
"It appears to be inevitable we will take a look at them," Ken Johnson, a spokesman for the chairman of the House Energy and Commerce Committee, Rep. W. J. "Billy" Tauzin (R-La.), said Wednesday.
Since Global Crossing filed for bankruptcy 21/2 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.
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 D. Dingell (D-Mich.), the committee's ranking Democrat.
Other congressional panels may have interest in the company as well. This week, Rep. Louise M. Slaughter (D-N.Y.) asked the 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.
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 has 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% 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 S. Cohen, President Clinton's Secretary of Defense, currently serves on Global Crossing's board.
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 chaired by former President George Bush's White House lawyer, C. Boyden Gray.
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.
"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 members 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."
Shiver reported from Washington and Kaplan reported from Los Angeles.
GRAPHIC: PHOTO: Rep. John D. Dingell PHOTOGRAPHER: Associated Press PHOTO: Rep. W.J. "Billy" Tauzin