Global's former finance officer testifies on 'swap' transactions. (Trading Places--Accounting After Andersen).

FORMER Global Crossing executive Roy L. Olofson testified last week before a House subcommittee on how the company engaged in controversial capacity swaps on its telecommunications network Here are excerpts from his opening statement:

It is very difficult for me and my family to pick up the newspaper and read how Global Crossing and its PR machine have accused me of being a disgruntled employee. It is also very difficult to find out that after spending over three years with the company, its chairman, Gary Winnick, has the audacity to stand up in front of the entire office and call me an extortionist.

So I am here today not merely to help you in the discovery of the truth, I am also here to help me and my family get our lives back.

When I was first hired at Global, I was responsible for the company's accounting and financial reporting functions. This was an incredibly exciting time for the company and we all felt very positive about its long term potential.

At the time our primary product was the sale of capacity known as IRUs and we worked closely with both the SEC and the FASB to properly understand and account for these transactions. We also had substantial assistance from Arthur Andersen and, in particular, its partner, Joseph Perrone.

In May 2000, Global Crossing hired Joe Perrone as its senior vice president of finance. Most of the people who previously reported to me began to report directly to him.

In January 2001, I was diagnosed with lung cancer. While I was on leave, I learned that Global was having a very difficult time meeting its first quarter revenue projections. Global ultimately was able to meet its numbers in part due to some large, last-minute transactions where Global swapped IRU capacity with other carriers.

I returned to work in early May 2001... One of the things I did was to listen to Global's quarterly conference regarding its financial results. During the call, one of the analysts asked whether there had been any capacity swaps in the quarter. I was very surprised to hear Global's CEO, Tom Casey, unequivocally state that "there were no swaps."

Both before and after this call, I spoke with some of the financial analysts in the company. There was a general sense of uneasiness about these swap transactions and in particular about a transaction with 360 Networks. I learned that 360 Networks and Global Crossing had entered into a last-minute transaction wherein Global booked $150 million in cash revenues even though it had not received a penny in cash.

At about this same time, (CFO) Dan Cohrs told me that the company needed someone to manage its working capital and that might be an appropriate role for me. He asked me to speak with Joe Perrone. During those meetings, Joe suggested several new responsibilities that I might assume.

At the end of our meeting on the second day, I took the opportunity to express my concerns about Tom Casey's statement that there had been "no swaps." Mr. Perrone attempted to brush off my concerns. He stated that he had added some language to Global Crossing's press release regarding purchase commitments and that he interpreted the question from the analyst as referring only to transactions called "Global Network Offers" and not to capacity swaps.

I disagreed with this interpretation and I also told him that analysts and investors would not understand the ramifications of the brief mention of purchase commitments.

It was clear that Mt Perrone did not appreciate my comments and didn't want to talk about it anymore. He was visibly upset. He then turned to me and said that the executive committee was meeting to discuss layoffs of 50 management personnel and that I should call him on June 6 to learn the results of the meeting. He said he would have to justify my position.

I was absolutely shocked. Prior to discussing my concerns, our conversations regarding my responsibilities were very positive and constructive. It had been rumored that the company was considering layoffs but I had no idea that it would include me.

On June 6, I called Mt Perrone but I was told that he was "unavailable." By June 21, I still had not heard from Mr. Perrone, so I spoke to Dan Cohrs. Mr. Cohrs told me that Mr. Perrone had been busy but that he would have Mr. Perrone call me. It just so happened that when I walked into Mr. Cohrs' office, he was working on a press release. I asked whether the press release was to reduce guidance for the rest of the year. Dan Cohrs stated, "I would like to, but the chairman had just sold 10 million shares of stock."

By mid to late July, I still had not heard from Mr. Perrone and no one at the company was communicating with me on any meaningful basis; and I was given virtually no responsibilities.

Pursuant to the company's ethics policy, any concerns about the propriety of financial reporting was to be directed to the Chief Ethics Officer, James Gorton. I sent a letter to Mr. Gorton on August 6, which outlined my concerns.

I received a letter from him assuring me that the matter would be fully investigated. We now know that while the company issued a press release in January 2002 stating that my concerns (were) found to be without merit, they had never given a copy of my letter to Arthur Andersen and had never interviewed me.

I see myself as simply an officer of the corporation who was merely attempting to do his job. I wrote my letter because I was concerned that the public was being misled. At the time, I believed the company would investigate my concerns in good faith. I was wrong. Instead, they fired me.