Global Crossing Ltd., after filing for bankruptcy protection and getting delisted, now faces an investigation of its accounting practices by the Securities and Exchange Commission.

Last week, the SEC asked the Bermuda-based telecommunications company for corporate documents and a letter sent by a former finance executive that raised concerns that Global Crossing and its auditor, Arthur Andersen, were misleading investors about the accounting for certain long-term leases. The company acknowledged the SEC investigation in a statement Sunday.

SEC officials declined to comment. Global Crossing said it provided the documents voluntarily and would continue to cooperate. Arthur Andersen spokesman Patrick Dorton declined to comment on the SEC matter, but said Global Crossing's filing for Chapter 11 bankruptcy protection last Monday was "long expected in an industry that already had 34 bankruptcies."

Questions from its former executive, Roy Olofson, as well as from outside analysts and investors, have come to the fore since Global Crossing filed for bankruptcy with $22 billion in assets and $12 billion in debts. And the SEC investigation comes amid mounting worries over corporate accounting, particularly among telecommunications companies and their use of aggressive techniques for booking revenues.

In such investigations, the SEC tries to determine whether accounting rules were violated. If it finds evidence of possible wrongdoing, the SEC will open a formal investigation, which in turn determines whether it files an enforcement action against the company. The decision whether to bring a case can take at least one or two years. The Los Angeles Times reported the SEC investigation Saturday.

At issue at Global Crossing are 20-year contracts for telecommunications capacity, so-called indefeasible rights of use, or IRUs, which carriers frequently swap with one another.

Such swaps are attractive to carriers, because accounting rules allow them to book an incoming contract as a large chunk of revenue, and then book the outgoing contract as a capital expense, which they typically emphasize as separate from operating results. Since it went public in 1998, Global Crossing continued to emphasize metrics that removed capital and interest costs. And it was this practice that Mr. Olofson was concerned about, writing in his letter that investors and commercial bankers may have been "intentionally misled" about the company's financial performance.

A lawyer for Mr. Olofson, Brian Lysaght of O'Neill Lysaght & Sun, in Santa Monica, Calif., said that Mr. Olofson addressed a number of other swap-related issues with management. In particular, Mr. Lysaght said his client was concerned that the company may have bought capacity from other carriers without yet specifying which routes it wanted, or in some cases bought unnecessary capacity on routes it had already built.

"Every single transaction that we did was audited and properly recorded," said Global Crossing Chief Financial Officer Daniel Cohrs. "The allegations are without merit."

Global Crossing was once considered a leading player in the telecommunications business, and its construction of a world-wide fiber-optic network widely attracted investors in the late 1990s and 2000, pushing its market-capitalization above that of General Motors Corp. A glut of fiber capacity, as well as a crushing debt load, sunk its prospects, however, and the company has since been delisted from the New York Stock Exchange.

The company is now seeking to restructure behind a $750 million cash injection from two Asian technology companies, subject to the approval of creditors.

-- Michael Schroeder contributed to this article.

Write to Dennis K. Berman at dennis.berman@wsj.com¹

Updated February 4, 2002