Corporate Failures Don't Threaten Bermuda

by Mike Godfrey, Tax-News.com, New York

01 February 2002

Following the collapse of Bermuda-linked companies Enron and Global Crossing, Enron's self-insurance vehicle in Bermuda has been petitioned into liquidation by the Bermudian insurance regulator after it failed to meet the minimum solvency requirement. Despite the problems with Enron and Global Crossing, and heavy stock losses for Bermuda-based Tyco, the head of the Chamber of Commerce International Companies Division, David Ezekiel, says that Bermuda's image as a location for international business should not be tarnished.

Reported yesterday in the Bermuda Royal Gazette, Mr. Ezekiel said: "I don't think that this is a jurisdiction question at all." He said both Enron and Global Crossing were SEC listed and that no matter where they were located, reporting of financial statements and auditing of statements were very strict. He said in the case of Enron there were procedures that had not been followed in terms of accounting and auditing, but said this did not relate to the fact that the company had operations in Bermuda.

Mr Ezekiel said of Global Crossing's bankruptcy filing this week: "Global Crossing was nothing but commercial failure based on market forces." He said that because Global Crossing had spent so much money laying communications cable and creating a worldwide infrastructure - combined with the fact that there was a glut of capacity in the sector - the company's debt service became impossible, bringing about the bankruptcy. Mr. Ezekiel said, "I wouldn't see any taint being attached to Bermuda because of this."

Acting Finance Minister Alex Scott told the paper that the issue of Enron and Global Crossing was definitely weighing on the markets, but said it was still too early to assess the impact on Bermuda's image from the collapses. He said that neither company featured in the investment portfolios of official government pension funds.
Mr. Scott added that it was impossible to tell how the US would react to Bermuda's role in hosting these companies, but added that the Island is vigilant in policing companies incorporated on the Island.

Tyco's shares continued to slide on Wall Street yesterday, but then Dennis Kozlowski, Tyco's chairman and chief executive, and the chief financial officer, Mark Swartz, said they would each buy 500,000 shares in the company with their own funds. The move, which will cost them at least $15m each, bolstered the company's shares, which ended up $1.20, or 3.5%, at $4.85. Mr Kozlowski repeated his previous assertion that the company was "substantially undervalued by the marketplace", and said the window remained open for other directors to buy shares.

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