IMG Implicated in Global Sales Inflation

NEW YORK -- Bankruptcy court documents indicate that Global Crossing altered a deal last year with IMG Worldwide, the sports marketing company, in an action similar to those that have prompted federal investigators to ask whether the company used swapping transactions to inflate sales.

Under the $30 million deal with TWI Interactive, a unit of IMG that uses web sites to market sports events like Wimbledon and personalities like Tiger Woods, Global Crossing and TWI agreed to exchange $15 million over five years.

TWI sought the agreement to acquire communications services such as web site management and capacity from Global Crossing, while Global Crossing hoped the deal would provide it with advertising and marketing services from TWI, according to the court documents.

For example, Global Crossing received the right to use the web sites of TWI's clients to say "powered by Global Crossing,'' or similar advertising of the company's communications services. TWI provided Global Crossing with these marketing services at a discounted rate of 50 percent, TWI's lawyers said.

TWI initially wanted the transaction to be structured as a straight barter deal in which no cash would be exchanged, but the deal was changed at Global Crossing's request to allow for an equal exchange of cash, according to documents submitted by TWI's lawyer, Timothy Sweeney of Cleveland.

"During these negotiations, the original concept of a straight barter deal whereby no cash, only services, would be exchanged was modified at Global Crossing's request, to an equal exchange of cash for respective services,'' TWI said in the court documents. "But, in all material respects, the deal remained as originally conceived by TWI and agreed to by Global Crossing.''

TWI agreed to Global Crossing's request and the companies signed an agreement in February 2001, a period in which Global Crossing's prospects as a provider of communications services on its 27-country fiber-optic network seemed bright.

Around that time, executives at Global Crossing were also creating the framework for deals with other communications companies that involved swapping communications capacity for almost equal amounts of money. Global Crossing says it accounted for these deals as liabilities with the revenue from the transactions booked over the life of the contracts.

The Securities and Exchange Commission and the Energy and Commerce Committee in the House are investigating these swaps and similar deals Global Crossing conducted with Enron to determine whether Global Crossing used the deals to inflate its revenue improperly.

Federal investigators are also planning to examine the swap with TWI and to question Global Crossing on the existence of any similar deals, a person close to the investigations said.

Tisha Kresler, a spokeswoman for Global Crossing, said that the company's advertising budget for 2001 was about $100 million when it began discussions with TWI.