UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x In re GLOBAL CROSSING ACCESS : Civil Action No . 04 MD 1630 (GEL) CHARGE LITIGATION, CONSOLIDATED AMENDED CLASS ACTION COMPLAINT . JURY TRIAL DEMANDED x Lead Plaintiffs, Chou Associates Management, Inc ., Alaska Electrical Pension Fund and Locals 302 & 612 of the international Union of Operating Engineers-Employer, Construction Industry Retirement Trust ("Plaintiffs"), individually and on behalf of all other persons similarly situated, by their undersigned attorneys, allege the following based upon personal knowledge as to themselves and their own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through their attorneys, which included, among other things : 1) review and analysis of filings made by and/or concerning Global Crossing Limited' ("Global Crossing" or the "Company") with the United States Securities and Exchange Commission ("SEC") ; 2) review and analysis of analyst conference calls concerning Global Crossing ; 3) review and analysis of securities analysts' reports concerning Global Crossing ; 4) review and analysis of wire and press releases, public statements, news articles and other publications disseminated by and/or concerning Global Crossing and the telecom industry ; 5) interviews of former Global Crossing employees and others with firsthand knowledge concerning Global Crossing and, in particular, the Company=s accounting for access costs ; 6) consultation with experts in the telecom industry ; 7) consultation with experts concerning damages ; and 8) review and analysis of other publicly availabl e information concerning Global Crossing and the telecom industry. Based upon the evidence already developed, Plaintiffs believe that further substantia l evidentiary support will exist for the allegations in this Consolidated Amended Class Action Complaint ("Complaint") after a reasonable opportunity for discovery . Most of the facts supporting ' On December 9, 2003, Global Crossing Limited became the successor company to Global Crossing Ltd. As this Court noted in its December 16, 2004 Order, AThe decline and fall of GX resulte d in massive litigation also pending in this Court.@ -1- the allegations set forth herein are known only to the defendants or are exclusively within their custody and/or control. PROCEDURAL HISTORY 1 . On October 22, 2004, the Judicial Panel in Multidistrict Litigation (the "MDL Panel") ordered the centralization in the United States District Court for the Southern District of New York (the "Court") of seven putative class actions alleging violations of the federal securities laws by Global Crossing resulting from the Company's alleged misrepresentations and omissions concerning its financial condition and accounting practices subsequent to December 9, 2003 . An eighth action was subsequently filed in this Court and assigned to the Honorable Gerard E . Lynch as a related case. 2. After the filing of motions for consolidation and appointment of lead plaintiff, this Court held a case management conference with all counsel and ordered the consolidation of the following actions for all purposes pursuant to Fed R . Civ. P . 42 (a) : Alaska Electrical Pension Fund v. Global Crossing Limited, et al., Dkt. No. 2 :04-3096 Harold Silverstein v. Global Crossing Limited, et al., Dkt . No. 2:04-2045 Eva Campbell v. Global Crossing Limited, et al., Dkt. No. 2:04-2089 Gerard P. Woods v. Global Crossing Limited, et al ., Dkt. No. 2 :04-2091 Rosario Marino v. Global Crossing Limited, et al., Dkt. No. 2:04-2195 Paul Zedeck v. Global Crossing Limited, et al., Dkt. No. 04 Civ. 3327 Gerald G. Buc v. Global Crossing Limited, et al ., Dkt. No. 04 Civ. 3446 Fred Johnson v. Global Crossing Limited, et al., Dkt. No. 04 Civ. 4572 3. By Order dated December 16, 2004, this Court appointed Plaintiffs as lead plaintiffs in this case pursuant to 15 U.S.C. §78u-4 and approved Plaintiffs' selection of counsel as lead counsel. -2- NATURE OF THE ACTIO N 4. Plaintiffs bring this action for violations of the Securities and Exchange Act of 1934, 15 U.S.C. §78 et seq. (the "Exchange Act") against Global Crossing and certain of its officers and directors (the "Individual Defendants," defined in ¶34 below) on behalf of themselves and a class consisting of all persons and entities that purchased or otherwise acquired the common stock of Global Crossing (NASDAQ : GLBC), between December 9, 2003, and April 26, 2004, inclusive (the "Class Period"), and were damaged thereby . 5 . This case arises from Global Crossing's fraudulent scheme to artificially inflate th e Company's reported financial results by understating its costs of access liability - the Company's principal cost of goods sold . Defendants' motives to commit fraud were many, including meeting certain conditions precedent to Global Crossing emerging from Chapter 11 bankruptcy proceedings and the Individual Defendants being able to cash in on extremely lucrative retention bonuses effective upon the Company's emergence from bankruptcy. On April 27, 2004, Global Crossing issued a press release in which the Company disclosed that it had materially understated its accrued costs of access liability on its balance sheet of December 31, 2003, by as much as $80 million and, as a result, expected to restate its 2003 financial results . 6. Global Crossing's press releases and SEC filings describe the Company as a provider of a full range of telecommunications services, including managed data and voice products to business centers and corporations . Global Crossing provides telecommunications services over a global network that reaches more than 200 major cities worldwide . 7. In January 2002, Global Crossing's predecessor, Global Crossing Ltd., and 54 of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") and coordinated proceedings in the Supreme Court of Bermuda . -3- 8 . On December 9, 2003, Global Crossing announced that it consummated a purchase agreement, allowing a newly restructured Global Crossing to emerge from Chapter 11 proceedings . Pursuant to this purchase agreement, Singapore Technologies Telemedia ("STT") invested $25 0 million in Global Crossing for a 61 .5 percent equity share of the Company . Global Crossing's plan of reorganization was confirmed by the Bankruptcy Court on December 26, 2002 , and became effective on December 9, 2003 . 9. According to the Company's press releases and other public statements , Global Crossing emerged from Chapter 11 with its core network in place, while retaining a revenue base of nearly $3 .0 billion. During its restructuring, the Company claimed to have reduced its operating expenses by 63 percent, as compared to the beginning of 2001 . Global Crossing's long-term debt and convertible preferred stock were substantially reduced from approximately $11 billion at the end of 2001, including $1 billion of Asia Global Crossing debt, to a mere $200 million of debt post- emergence. 10. Global Crossing's plan of reorganization provided for the cancellation of its existin g preferred and common stock . The holders of these previously publicly traded securities received n o consideration under the Company's plan of reorganization . Under the plan of reorganization, Global Crossing issued 61 .5 percent of the outstanding equity or 18 million shares of new preferred stock and 6 .6 million shares of new common stock to STT in consideration for its $250 million equity investment in the new Global Crossing. The remaining 38.5 percent of the outstanding equity or 15.4 million shares of the new common stock was distributed to Global Crossing's former secure d and unsecured creditors . 11 . Throughout the Class Period, Global Crossing's SEC filings and press release s reported positive financial results that the Company attributed to decreasing costs of operations, and , -4- in particular, reduced costs of access that were purportedly achieved by negotiating superior interconnection agreements with other telecom carriers (also know as "access providers") . 12. Global Crossing's costs of access was the Company's principal cost of goods sold . Access costs are charges that are imposed by local exchange carriers when a long distance carrier's customer originates and terminates a local or long distance call . Depending upon the configuration of the long distance carrier's network, the carrier may be able to aggregate the voice traffic from multiple locations and transport it over their own long-haul city-to-city circuits (also called "backbone") between major points of presence (locations in a particular market where a carrier houses its computer and switching equipment) close to its intended destination and then hand-off th e call to a local exchange carriers ("LEC"), which charges a fee to terminate the call . 13 . For most telecom carriers, access fees are based on : (a) "interconnection agreements" with LECs, pursuant to which the LEC agrees to provide telecommunications services (e.g., for the transport and/or termination of telephone exchange traffic) at a specific unit price, an d (b) "tariff rates," which are telecommunications services that are required to be provided by an access provider pursuant to a tariff filed by the access provider with the Federal Communications Commission ("FCC") or other state regulatory bodies. Based on the volume of traffic