Examiner to Review Global’s Records

Global Crossing Ltd.’s financial records, already under scrutiny by federal investigators, also will be reviewed by a court-appointed outside examiner.

The telecommunications firm, which filed for bankruptcy protection Jan. 28, agreed to the move Wednesday during a hearing in Bankruptcy Court in New York. The examiner, to be selected by the U.S. trustee, will review Global Crossing’s 2001 and 2002 books and report back to the court.

In approving the examiner, Judge Robert Gerber rejected a request from two shareholders who wanted the court to take the more drastic step of replacing the company’s current executives with an independent trustee.

Global Crossing’s accounting methods have been under suspicion since February, when a former employee’s allegations of faulty bookkeeping triggered investigations by the Securities and Exchange Commission and the FBI.

Investigators are reviewing the way Global Crossing accounted for sales of network capacity to other telecommunications firms and are examining the timing of certain executive stock sales. Global Crossing operates a worldwide communications network.

Former employees have accused the company of misleading investors by engaging in sham deals with other firms--including Qwest Communications International Inc.--to boost key financial figures for both companies.

Company officials say they are cooperating with investigators. Global Crossing replaced longtime auditor Arthur Andersen earlier this year, but because of the probes, the company has not filed audited results for 2001 or 2002.

“With all these ongoing investigations, it’s natural that we would want to appoint an independent examiner,” said a company spokeswoman, who did not want to be identified.

The move came as Global Crossing completes negotiations with investors to buy all or part of the company. Global Crossing on Wednesday postponed--for the sixth time--the final bidding phase, moving the formal auction from today to Aug. 14.

Sources say the company’s leading offers would produce a significantly diminished payback for Global Crossing’s bankers, bondholders and creditors, a group that in May rejected an “inadequate” bid of $750 million from Hutchison Whampoa Ltd. and Singapore Technologies Telemedia.

The two Asian firms now are said to be the leading candidates to buy the company, but at a much lower price. Although one source called the situation “very fluid,” one version of the Hutchison-STT bid gives them 62% ownership in a restructured Global Crossing in return for $250 million to $300 million in cash and $200 million in notes.

Global Crossing’s bankers would get most of the cash, $175 million of the notes and a 6% stake in the revamped firm. Bondholders would get $25 million in notes and end up owning 32% of the company, according to one account. Existing shareholders would be wiped out.