Emerging from bankruptcy may wipe away much of the debt from a company's balance sheet. Unfortunately, it can't clean up the rest of the books. Yes, that's the sad lesson we learned this week from Global Crossing ( GLBC), the New Economy telecom giant that collapsed into a very Old Economy bankruptcy back in January 2002. The company exited Chapter 11 about four and a half months ago, all bright and shiny and ready to conquer the telecom market all over again. It seems, however, that Global Crossing -- which back in the days of the telecom bubble goosed its revenue with capacity swaps of questionable value -- has found a new way to get into trouble. The company said Tuesday that it likely underreported access costs by $50 million to $80 million in 2003. In other words, the annual report it filed with the Securities and Exchange Commission only one month earlier is wrong. Global Crossing said Tuesday its understatement stems primarily from incorrect estimates of access costs and its failure to reconcile the expenses to actual vendor invoices. "The company is assessing the internal control issues presented and ... currently believes that these issues constitute a material weakness in its internal controls," the company stated with masterful clarity. It backed off its financial statements for the past two years, as well as its guidance for 2004. Predictable stuff has happened since then. The company's stock lost more than 40% of its value since the announcement. Global Crossing's onetime auditor, Grant Thornton, has withdrawn its related audits. You can take the company out of bankruptcy, but you can't take the bankruptcy out of the company.
2. Tall Tales from Long Island
Speaking of truthful statements, Computer Associates ( CA), after years of insisting its accounting was completely aboveboard, this week formally admitted -- guess what? -- that its accounting was anything but.