The Labor Department is questioning former Global Crossing Ltd. workers about the bankrupt company's 401(k) retirement plan, apparently to determine if any pension laws were broken.
Former Global Crossing employees said this week they have been contacted by Labor Department investigators, who asked for copies of documents distributed to workers describing the company's 401(k) plan and its features.
FOR THE RECORD
Los Angeles Times Saturday March 2, 2002 Home Edition Main News Part A Page 2 A2 Desk 3 inches; 89 words Type of Material: Correction
Global Crossing--Global Crossing Ltd.'s available cash increased by $100 million from Jan. 28 to Feb. 25. A story in Wednesday's Business section incorrectly reported that it had declined by $200 million. A Wednesday story about Global Crossing's 401(k) plan incorrectly reported that the company's bankruptcy is the fifth-largest in U.S. history. It is the fourth-largest. In addition, a Sunday story about Global Crossing's board of directors incorrectly stated that former director Norman Brownstein is a childhood friend of Global Crossing Chairman Gary Winnick. In fact, the two have known each other for about 15 years.
The investigators "said that they were opening an investigation into Global Crossing's 401(k) program and [were] very interested in any additional information that they could glean from any present or former employee," said one former employee, who asked not to be identified.
Global Crossing workers lost about $250 million between 1999 and 2001 when the value of the company stock in their 401(k) accounts tumbled from a peak of $64 to 30 cents before the company filed the fifth-largest bankruptcy in U.S. history Jan. 28.
A Global Crossing spokeswoman said the company had been contacted by Labor Department investigators and was cooperating.
"Our [attorneys] will work to provide all necessary information and answer any questions [investigators] may have," said spokeswoman Janis Burenga.
The Labor Department routinely examines the retirement plans of companies that have filed for bankruptcy to make sure employees' retirement money is safe and being properly distributed as companies reorganize, said department spokeswoman Gloria Della. Della would neither confirm nor deny that such an investigation was taking place at Global Crossing.
The telecom giant, which is based in Bermuda and has executive offices in Beverly Hills, is under investigation by the Securities and Exchange Commission and the FBI for its accounting methods. In addition, members of Congress have demanded investigations into the company's retirement plans, and employees have sued over losses in their 401(k) accounts.
Global Crossing employees said labor investigators also questioned them about the company's severance packages. Global Crossing cut off severance pay to thousands of laid-off workers when it filed for bankruptcy, but in the preceding months forgave loans and made $15 million in lump-sum pension payments to certain executives.
Regulators simply may be making sure employee contributions were deposited into the 401(k) plan, said Los Angeles pension lawyer Alex Brucker. Troubled companies sometimes illegally use 401(k) contributions to pay bills, although such behavior is far more common at small, private companies than at large, publicly traded firms, pension lawyers said.
