Investigators Say Global Crossing, Qwest Withholding Information

Global Crossing Qwest Communications

Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, said the subpoena power is needed "to make sure no critical document is withheld from this committee."

Committee spokesman Ken Johnson said both companies have been slow to provide documents or have refused to provide them to investigators.

Qwest spokesman Tyler Gronbach said Wednesday that the company, a large provider of local telephone service in the West, has already provided 250,000 pages of documents to investigators.

Spokesmen for the bankrupt Global Crossing, a fiber optic company, did not immediately return telephone calls seeking comment.

One area under investigation involves deals between telecommunications companies to swap capacity on their networks. Critics of the swaps have called them phony transactions designed to boost revenues and mislead investors.

"I'm stunned by what we've learned so far," said Rep. Jim Greenwood, R-Pa., chairman of the investigative subcommittee. "Companies seem to have had cultures that demand making Wall Street numbers at all costs, even if it meant entering into sham transactions and secret deals."

In one instance, Qwest declined to turn over the findings of an internal investigation of its deal with FLAG Telecom to swap capacity on their networks, Johnson said.

The panel already has subpoenaed Gary Winnick, chairman of Global Crossing, to appear at a Sept. 24 hearing, although Johnson said it is now more likely that Winnick will be called to testify at a later hearing.

The later hearing, for which a date has not been set, probably will also include Joseph Nacchio, Qwest's former chief executive, and other high-ranking officials from Qwest and Global Crossing, Johnson said.

The Justice Department and the Securities and Exchange Commission are investigating the accounting of Global Crossing, based offshore in Bermuda. Denver-based Qwest, the biggest provider of local phone service in 14 Western states, has acknowledged major accounting errors and is under investigation by the SEC.

Among other things, the committee has been investigating whether Winnick, who founded Global Crossing, acted to inflate the fiber optic company's balance sheet before selling large chunks of its stock.

Winnick sold $734 million in stock before the company filed for bankruptcy protection in January. Two Asian companies bought Global Crossing out of bankruptcy last month for $250 million, a fraction of the $22 billion in assets the company listed in its bankruptcy court filing.

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