Settled, neither admitted nor denied US NASDAQ

Global Crossing: Hundreds of Millions in Reciprocal Fiber Capacity Swaps

Sold capacity on fiber networks while simultaneously agreeing to purchase identical amounts from counterparties with no commercial justification.

CASE PROFILE & BENCHMARKS

Target Issuer: Global Crossing Ltd. (US).
Fraud Period: January 1, 2002 to December 31, 2004.
Reported Overstatement: $750.0M.
Total Fines & Penalties: $0.
Maximum Incarceration: No prison sentence.
Independent Auditor: Arthur Andersen LLP.
Primary Schemes: round tripping.
Enforcement Status: SETTLED (neither admit nor deny).

OVERSTATEMENT $750.0M USD reported

TOTAL PENALTIES $0 Civil & disgorgement

PRISON TIME None No prison sentence

FIRST ACTION September 20, 2004 Initial proceeding

DETECTION METHOD Regulatory Enforcement & Forensic Audit Discovery source

PRIMARY REGULATOR U.S. Securities and Exchange Commission US

ACCOUNTING MECHANICS FOR THIS CASE

HOW IT WAS DONE

Without admitting or denying the findings, the respondents consented to orders establishing that The company manipulated its accounting records by executing schemes under round-tripping. Financial reports filed with market regulators contained material misstatements that distorted true financial condition.

Applicable Scheme Classifications:

round tripping →

CHARGED RESPONDENTS & OUTCOMES

1 NAMED PARTIES

Respondent	Role	Disposition & Judicial Outcome	Prison	Civil Penalty	O&D Bar
Global Crossing Ltd.	ISSUER	Enforcement order and financial sanctions imposed.	None	$0	No

RED FLAGS OBSERVED PRIOR TO DISCOVERY

EARLY SIGNALS

CASH FLOW TO NET INCOME DIVERGENCE 2002 Operating cash flow severely diverged from reported earnings

ENFORCEMENT ACTIONS & PRIMARY DOCKETS

PRIMARY SOURCE CITATIONS

aaer ENF-2002-global-crossing

Filing Date: September 20, 2004

Enforcement Action: Global Crossing: Hundreds of Millions in Reciprocal Fiber Capacity Swaps

Sold capacity on fiber networks while simultaneously agreeing to purchase identical amounts from counterparties with no commercial justification.

Provisions: Securities & Corporate Law Compliance

Disposition: neither admit nor deny View Primary Record ↗

Source: U.S. Securities and Exchange Commission: Accounting and Auditing Enforcement Releases (AAER) • Official Jurisdiction: US • Licence: Public Domain (17 U.S.C. § 105)

TIMELINE OF EVENTS

CHRONOLOGY

June 1, 2002 • Misstatement

Material accounting irregularities commenced.

September 20, 2004 • Enforcement

Regulators commenced formal proceedings.

FINANCIAL CRIME REFERENCE SERIES

Cross-Domain Investigation Network

Major corporate accounting scandals frequently intersect with parallel financial crime domains. For violations outside financial reporting scope, explore the companion reference libraries in our open research series:

How Scams Work ↗

Consumer fraud, advance fee fraud, romance scams, phishing, social engineering, impersonation

How Money Laundering Works ↗

Placement, layering, integration, trade-based money laundering, smurfing, shell companies, bank secrecy

How Sanctions Evasion Works ↗

OFAC enforcement, dark fleet shipping, transshipment hubs, export control violations, circumvention networks

How Market Manipulation Works ↗

Spoofing, pump and dump schemes, wash trading, front running, insider trading, benchmark fixing

How Tax Evasion Works ↗

Offshore tax havens, transfer pricing abuse, carousel fraud, undeclared foreign accounts, aggressive tax shelters