Global Crossing Denies Shredding
Sun Jun 23, 3:43 PM ET
By Jeremy Pelofsky
WASHINGTON (Reuters) - Bankrupt telecommunications services provider Global Crossing Ltd. has denied allegations that the company shredded documents contrary to orders that it retain them while securities regulators investigated potential wrong-doing.
The U.S. Bankruptcy Court for the Southern District of New York unsealed documents late Friday outlining the allegations by a current company employee brought to light on June 10 by Ohio State Retirement Systems, which lost $116 million between 1999 and Global Crossing's demise earlier this year.
A receptionist at its New Jersey offices, Cathleen Kicak, said in a sworn affidavit that two employees left a storage room where she saw a shredding machine sitting on a garbage pail and heard it operating just before they left.
The court initially sealed the documents outlining the allegations pending a probe by the parties and allowed them to be unsealed late Friday.
"Having now completed our investigation, we have concluded that there is no merit to the allegations and that they remain largely unsubstantiated," Global Crossing said in a statement.
"While we have found isolated incidences of document disposal in the ordinary course of business, none of the documents involved appear to have any relevance to pending litigation or governmental investigations," the company said.
Global Crossing -- operator of a high-speed communications network that connects more than 200 cities in 27 countries -- filed in January the fourth-largest U.S. bankruptcy, buckling under $12.4 billion in debt, stiff competition and a glut of capacity.
The company is being investigated by the Securities and Exchange Commission ( news - web sites) and the Federal Bureau of Investigation for its accounting practices, allegedly engaging in network capacity swaps with other firms to inflate revenue.
Allegations of corporations shredding important documents has become a more frequent phenomenon in recent months. Auditor Andersen [ANDR.UL] was convicted of impeding the probe of the collapse of energy giant Enron Corp. by shredding audit records after the SEC began its investigation.
Global Crossing said it sent a reminder to employees on June 17 of their obligation to preserve company documents. The Ohio State Retirement Systems told the bankruptcy court that the request for information about possible shredding had been provided.
EMPLOYEE ALLEGATIONS
On Feb. 7, one day after receiving a subpoena from the SEC, Global Crossing said it sent a memo to all employees around the world to keep all corporate documents and on Feb. 8 sent a similar notice to many current and former company officers and directors.
Kicak, while on a break, said she visited another receptionist on the third floor of Global Crossing's New Jersey's headquarters in February and were discussing that two employees, Beth Hunt and Steve Scro, were in a storage room alone together.
"Shortly thereafter, Ms. Kicak heard the noise she later identified as the shredder and then observed Ms. Hunt and Mr. Scro exit the left storage room and saw the shredder sitting on the garbage pail in the middle of the floor," according to Ohio Retirement Systems' court filing.
Global Crossing challenged the allegations that document destruction may have occurred after these warnings, saying that Kicak admitted never seeing Hunt nor Scro shred any document nor any employee shred documents in the storage room in question and said the noise could have been a vacuum cleaner.
"The two accused employees denied being involved in any incident like the one described by Ms. Kicak and denied having destroyed documents," Global Crossing said in its own court filing.
Scro is the son-in-law of Joseph Perrone, Global Crossing's vice president of finance who has been named in several class action lawsuits for securities fraud. Hunt is an assistant to Perrone and other company executives.
SOME DOCUMENTS BY OFFICES SHREDDED
Global Crossing did admit that some documents, like confidential client or customer information as well as drafts of employee evaluations, or commercial bid documents have not been preserved or were shredded.
Shredding machines have been taken out of service, materials that otherwise would be destroyed are being stored and some reports shredded do exist in electronic form, the company's court filings said.
The Ohio State Retirement Systems also shed light on other shredding that took place before Global Crossing filed for bankruptcy involving documents that belonged to Wally Dawson, the executive vice president of global network who left the company on Jan. 9.
Scro and Hunt said they witnessed Dawson's chief of staff, Sharon Wolff, "shredding a significant volume of paper" on the evening of Jan. 21 and on the morning of Jan. 22 and Scro informed two company executives, according to the Ohio filing.
Lawyers for Global Crossing said the documents belonged to Dawson and were research materials and materials that Dawson "had kept from his former employers."
(With additional reporting by Siobhan Kennedy in New York.) |
