Simpson Thacher is now at risk of lawsuits from creditors of the defunct telecoms company.
A report released last Monday (10 March) by the Special Committee on Accounting Matters makes clear that neither Global Crossing or Simpson Thacher deliberately concealed wrongdoing at the company, but is nevertheless highly critical of the US firm.
In August 2001, Global Crossing received a letter from whistleblower Roy Olofson indicating that transactions in which network capacity was exchanged between Global Crossing and other telecoms firms were fraudulent. The company called in Simpson Thacher to investigate.
The investigation was led by Rhett Brandon, a Simpson Thacher partner on secondment at Global Crossing, raising serious conflict issues.
Once the company went under, the US bankruptcy court commissioned a report from Coudert Brothers into the original Simpson Thacher investigation. The report claimed that Simpson Thacher's investigation “proved to be flawed and incomplete, as were its advice and assistance to Global Crossing”.
The special committee report ultimately absolved Global Crossing of Olofson's fraudulent allegations. However, it came down hard on Simpson Thacher.
In conclusion, the report said: “The manner in which the investigation was conducted suggests that both Brandon and ST&B breached their respective professional obligations to the company, which suffered significant damages as a result.”
Simpson Thacher was not available for comment.