360networks subpoenaed in Global Crossing probe
Regulators hit 360networks with a subpoena as part of the U.S. Securities and Exchange Commission's investigation of Global Crossing, the company said today. Last week, Qwest Communications International received a similar summons.
In a terse statement, 360networks said it would cooperate fully with the SEC's request for documents, although it did not specify what those were.
360networks spokeswoman Nancy Bacchieri says the company is not commenting on the investigation beyond the released statement, nor would she say what documents were requested.
Since shortly after its Jan. 28 bankruptcy filing, Global Crossing has been under separate investigations by the SEC and the Federal Bureau of Investigation, after former VP of Finance Roy Olofson publicly questioned Global Crossing's accounting practices, including capacity swaps with other telecom carriers, a common practice, observers say. But Olofson alleged the swaps allowed the company to artificially inflate its revenue, and specifically cited a deal with Qwest and a $150 million agreement with 360networks, The Wall Street Journal reports.
In a company statement issued Feb. 4, Global Crossing said Olofson, sent a letter to the company in August about certain financial reporting issues related to its Asia Global Crossing unit. Olofson claimed the company improperly reported pro forma values for cash revenue and adjusted EBITDA, in part because it included amounts for which cash was not received.
In July 2000, 360networks and Global Crossing had announced a $180 million, multiyear deal, where 360networks would purchase high-bandwidth capacity on about 8,000 miles of Global Crossing's network. In turn, Global Crossing said it would buy more than 2,300 miles of dark fiber from 360networks on five routes in the Western United States and Canada.
The arrangement would give 360networks flexibility in using capacity and give Global Crossing access into Canada, the two said at the time.
Olofson's attorneys announced yesterday that he would file a wrongful termination lawsuit against the company within the next week.
Vancouver-based 360networks operates a 22,000-mile optical mesh fiber network in North America. In June, it filed for bankruptcy in Canada and the United States. In October, four subsidiaries likewise filed for protection in Canada, and European and Asian subsidiaries also have started insolvency proceedings.
Bermuda-based Global Crossing filed for Chapter 11 bankruptcy in the United States and Bermuda Jan. 28, and announced a restructuring that included a $750 million infusion from two Asian companies. Global Crossing reported $12.3 billion in debt and $22.4 billion in assets, eventually securing it a spot as one of the country's largest bankruptcies and leading to questions about the state of the fiber optic industry.