Failed Bermuda-based telecommunications giant Global Crossing is being investigated by the Securities and Exchange Commission (SEC) as well as the Federal Bureau of Investigation (FBI) it was revealed on Friday night.

Former Global Crossing vice president of finance Roy Olofson has accused the company of overstating revenue and misreporting costs, but Global Crossing denied the claims and has accused Mr. Olofson of demanding cash to drop a lawsuit over his departure from the company in September.

Talk also emerged Friday night that two top Global Crossing executives benefited with `sweet-heart' loans from the company.

Olofson's statements outline several deals in which Global Crossing swapped network capacity to boost revenue, but in only one deal does he name the company on the other side. That company was Qwest. Olofson's attorney clarified Wednesday that Qwest was not involved in most of Global Crossing's deals. He added that Olofson detailed the Qwest-Global Crossing deal only to illustrate alleged wrongdoing on Global Crossing's part, not Qwest's.

The deal in question came to light in August, when Qwest issued a news release announcing it had added several routes of fibre-optic lines to its network through an exchange with another carrier. Global Crossing did not intend to announce the deal, according to Olofson's statements.

The Denver Post also reported that a statement released by Olofson's attorneys last Monday reads: "Mr. Olofson believes that the concern about the Qwest press release was based on the fact that Qwest and Global Crossing had swapped approximately $100 million of capacity in each of the first two quarters (of 2001), some of which had not even been defined at the time of sale, that each company accounted for the transactions differently despite having the same firm of outside auditors (Andersen LLP), and that further investigation could lead to the conclusion that these transactions were simply nonmonetary exchanges of capacity."

Qwest spokesman Michael Tarpey on Wednesday countered that Qwest has always bought or sold specific amounts of capacity on its network, not undefined amounts. He added that Qwest collected or paid cash in each deal, completed both sides of any given swap in the same quarter and followed generally accepted accounting principles when recording the deals.

"Between 1998 and the third quarter of 2001, we did do several hundred million dollars worth of transactions with Global," Tarpey said. "We paid cash. We recorded it as a normal manner of business. We are not going to comment on specific routes or specific contracts we had with them."

Global Crossing's accounting for its network deals has caught investors' attention since the company revealed on February 4 that the SEC is investigating its books. Some investors are concerned that the investigation will spread to other companies operating fibre-optic networks. Qwest chief financial officer Robin Szeliga told analysts that Qwest has not been contacted by the SEC on the matter.

Qwest disclosed in an SEC filing last year that it spent $450 million to buy capacity on other carriers' networks in the first half of 2001. In the same span, Qwest sold $540 million of capacity to those carriers.

Qwest has fielded criticism for the aggressive, albeit legal, methods it used for accounting for network-capacity sales, and the company has not done any such deals since last year's third quarter.

On January 28, Global Crossing and certain of its affiliates (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda.

On Febuary 4, Global Crossing received an inquiry from the SEC for the voluntary production of certain information in connection with issues raised in a letter from a former employee. The current investigation is related to the SEC's previous inquiry.