ary Winnick, the billionaire chairman and founder of Global Crossing, may have helped oversee the company's aggressive use of swapping communications capacity on its fiber optic network with other companies, according to documents obtained by a Congressional committee.
These swaps, widespread until the financial collapse of Global Crossing and several of its competitors over the last year, may have been instrumental in allowing companies to show robust financial health at a time when their business was actually deteriorating. The Securities and Exchange Commission ruled earlier this month that Global Crossing and other companies often improperly accounted for such deals.
Representatives for Mr. Winnick, who made more than $730 million from deals involving Global Crossing stock before the company filed for bankruptcy protection in January, have argued that he knew little about day-to-day management of the company in his role as chairman.
The House Energy and Commerce Committee, however, is shifting the focus of its investigation of business practices at Global Crossing to the activities of Mr. Winnick after obtaining detailed minutes of board meetings, internal company e-mail messages and copies of presentations by Global Crossing executives describing such swaps, a spokesman for the panel said.
Global Crossing, which was bought out of bankruptcy earlier this month by two Asian companies, also faces separate investigations by the House Financial Services Committee, the S.E.C. and the Justice Department.
The Energy and Commerce Committee, which began its investigation of Global Crossing in February after the company filed for bankruptcy protection, may issue a subpoena to Mr. Winnick after his representatives angered its members by trying to establish the terms of an interview by Congressional investigators.
"Winnick has agreed to tell us about his first-grade activities and who he dated in high school but has refused to talk about anything under investigation by the S.E.C.," said Ken Johnson, an aide for Representative Billy Tauzin, Republican of Louisiana and chairman of the committee. "This is a problem for us, and Chairman Tauzin is strongly considering issuing a subpoena for Winnick."
Gary P. Naftalis, a lawyer representing Mr. Winnick, said, "I'm not aware of any subpoenas being served yet." In addition to Mr. Naftalis, an expert on white-collar criminal defense at Kramer Levin Naftalis & Frankel, Mr. Winnick is being advised by Howard J. Rubenstein, the prominent New York public relations executive.
According to a copy of minutes of a meeting of the executive committee of Global Crossing's board on March 30, 2001, Mr. Winnick led a discussion of a deal with another company, 360networks, that was apparently structured to allow Global Crossing to meet analysts' estimates for the first quarter of last year.
Several executives argued against the swap, which was originally valued at $400 million, but Mr. Winnick, who was chairman of the meeting, on the last day of that quarter, eventually led a discussion that resulted in its approval, according to testimony obtained by the committee.
A short time after the deal was put into place, the entire transaction unraveled after 360networks filed for bankruptcy protection. Still, Global Crossing was able to meet the expectations of financial analysts when it reported its results for that quarter, Mr. Johnson said.
Mr. Naftalis referred questions about 360networks to Ralph Ferrara, a lawyer for Global Crossing, who did not return phone calls.
According to Mr. Johnson, the committee is also trying to determine whether Mr. Winnick and other executives acted improperly in selling Global Crossing stock in May 2001 after the 360networks and similar deals were reached. Mr. Winnick sold $123 million in stock that month before James C. Gorton, the company's general counsel, closed the window for such transactions in June 2001 because of the company's fading prospects.
Thomas J. Casey, a former chief executive at Global Crossing, told committee investigators that Joseph Perrone, the executive vice president for finance, told him as early as April that the company's revenues were softening. That information has raised concern among investigators whether a subsequent study in mid-May of the effect of the telecommunications crisis on Global Crossing was intended to provide cover for stock sales that month that could not have taken place the next month.
"Mr. Winnick's stock sale in May was done without any knowledge of facts that would have made it improper," Mr. Naftalis said.
The committee has also obtained e-mail messages that appear to suggest high-ranking executives at Global Crossing understood that the practice of swapping communications capacity was intended mainly to allow the company to meet analysts' quarterly estimates instead of fundamentally improving business. In one message dated May 31, 2001, discussing ways to compensate sales representatives for putting together swaps, Mr. Casey told Mr. Gorton, the general counsel, "Let me make sure I understand your position here: if we don't get these deals, we miss our quarters; if we don't incentivize the sales force they won't do these deals."