Bendiola, Ivan C.

Global Crossing Accounting Scandal

Global Crossing was a telecommunications company with broad ambitions to
rapidly expand its telecommunication services throughout the world. However, it
filed for bankruptcy protection in 2002 caused by following fraudulent reasons or
activities:

reporting revenue for long term contracts in full at the initiation of the
contract, rather than proportionately over its life leading to revenue
misstatement because revenues were not being reported in the period
they were earned
improper revenue reporting occurred when Global Crossing sold $100
million of telecommunication facilities to Qwest Communications
International Inc., in return for a similar valued amount from Qwest.
Qwest did not record this transaction as a sale, however Global Crossing
did report this as sales revenue despite cash never changing hands
concealing these misstatements by Joseph Perrone, a former Arthur
Andersen employee
Perrone adviced Global Communications to fund a project involving his
son, Joseph Perrone, Jr., that totaled over $1 million in Global Crossing
expenditures which brought up conflict-of-interest concerns
a conflict-of-interest issue occurred when several high ranking
executives of Global Crossing, including its founder Gary Winnick, sold
off shares of the company. Winnick sold $123.5 million worth of shares
before the company's eventual bankruptcy

As the company filed for bankruptcy protection, employees who were laid off
were told that they would receive no additional payments from their severance
packages, and that they would have to stand in line behind other creditors.
Many current and former employees have lost much of the value of their
$401(k) investments because ''the company matched the amount workers put in
with Global Crossing stock, and it could not be sold for five years,'' said Linda
McGrath, president of Local 1170, the Communications Workers of America. ''A lot
of workers made their contribution in stock, because they had faith in their
employer.''