Capital Markets

Cross Off Global Crossing?

The troubled telecommunications company, which emerged from bankruptcy in December and listed on the Nasdaq in late January, now faces delisting.
Stephen TaubMay 5, 2004

Global Crossing is embroiled in a new accounting scandal that could result in its being delisted from the Nasdaq Stock Market.

After the company announced last week that it would restate its 2003 results and review its results for 2002, Global Crossing was informed by the Nasdaq that the telecom’s common stock was not in compliance with the filing requirements for continued listing, according to the Associated Press.

The Nasdaq added that Global Crossing will be delisted unless it requests a hearing with the stock market’s qualifications panel, which the company intends to do shortly, added the AP.

The current troubles for Global Crossing began last Wednesday. The telecom announced that it would restate financials for 2003 because they understated liabilities for access charges in the company’s 2003 financial statements by $50 million to $80 million.

The company’s auditor, Grant Thornton LLP — which the company had replaced on April 2 with Ernst & Young LLP, according to the Associated Press — said on Friday that its audits dated March 8, 2004, December 23, 2003, and September 10, 2003 could no longer be relied upon.

Global Crossing hired Deloitte & Touche LLP to conduct an independent review of the company’s cost-of-access liabilities, cost-of-access expenses, and related internal controls. It added that Grant Thornton will evaluate the company’s procedures and determine whether it can reissue the withdrawn audit reports.

The series of bad news has sent Global Crossing’s stock spiraling downward by nearly 70 percent in the past week alone.

Keep in mind that the company emerged from bankruptcy protection in December. Global Crossing was the second-largest telecom bankruptcy, trailing only WorldCom Inc.

Global Crossing — nominally headquartered in Hamilton, Bermuda, though most press releases carry a dateline of Florham Park, New Jersey — is also still reportedly being investigated by the Securities and Exchange Commission and the Justice Department for prior accounting practices.