Posted on 08/30/2002 12:39:07 PM PDT by Liz
WASHINGTON (AP) - Congressional investigators are examining whether Global Crossing Ltd. chairman Gary Winnick acted to inflate the telecom's finances before selling large chunks of its stock.
Internal e-mails, minutes of Global Crossing's board meetings and interviews with a cooperating former senior executive have raised investigators' "suspicions about possible insider trading" by Winnick and other executives, said Ken Johnson, spokesman for the House Energy and Commerce Committee.
Winnick sold $734 million in stock before the company, which built a worldwide fiber-optic network, filed for bankruptcy protection in January.
Two Asian companies bought Global Crossing out of bankruptcy earlier this month for $250 million, a fraction of the $22 billion in assets the company listed in its bankruptcy filing.
The committee, which has been investigating Global Crossing since February, has so far been frustrated in its efforts to interview Winnick about the transactions, Johnson said.
Lawyers for Winnick are scheduled to meet with committee aides Tuesday to arrange an interview with the billionaire Beverly Hills executive and company founder, Johnson said.
"We're going to give Mr. Winnick's attorneys one last chance to head off a subpoena," Johnson said. "He can either meet with our investigators voluntarily or raise his right hand before the committee."
Gary Naftalis, a lawyer for Winnick, said his client has done nothing improper and has cooperated with investigators. Naftalis would not comment on negotiations with the committee.
Investigators are focusing on a deal with 360Networks, a Canadian telecom, that Winnick and other Global Crossing directors approved on March 30, 2001, the last business day of the quarter, according to minutes of a meeting obtained by the committee.
The transaction was a swap of telecommunications capacity on the companies' fiber-optic networks for which Global Crossing paid its ailing counterpart $50 million in cash. In return, Johnson said, Global Crossing received "nothing but a bloated financial statement" that appeared to increase its cash revenues by $150 million.
Such swaps, used by Global Crossing and other telecommunications companies, have come under increasing scrutiny as efforts to make the companies appear healthier than they were. Internal e-mails obtained by the committee indicate that Global Crossing executives understood that a major purpose of the swaps was to satisfy analysts' quarterly estimates of the company's performance.
"If we don't get these deals, we miss our quarters," Thomas Casey, a former chief executive, wrote.
The timing was important because it allowed Global Crossing to meet financial projections for the quarter, an unnamed former executive told investigators. Johnson would not identify the executive.
Ralph Ferrara, a lawyer for Global Crossing, defended the 360Networks deal as a way to add fiber-optic capacity across the Atlantic. "The company paid $50 million and thought it was getting the answer to one of the most serious problems the company was facing at the time," Ferrara said.
He dismissed allegations that Winnick forced the deal through over objections.
Casey has told the committee that Joseph Perrone, the executive vice president for finance, said in April that Global Crossing was in financial trouble.
The following month, Winnick sold $123 million in stock and six other executives sold shares worth more than $20 million.
In June, amid worsening finances, James Gorton, the company's chief counsel, ended executives' ability to cash in their stock.
Naftalis, Winnick's lawyer, said, "There isn't a shred of evidence that his stock sale was in any way wrong or illegal."
Global Crossing also is under investigation by the Securities and Exchange Commission, the FBI and another congressional committee.
No one could have said it any better than that.....thanks.....
I'd like to know how McAwful got his initial $100 thou GX investment? Was he a fictitious employee of GX, listed on the payroll, but doing nothing for his "salary?" Or was the $100 thou an unsecured loan from GX? (SEC don't like stuff like that.)
Or did McAwful actually make an investment before cashing in?
The day after Global Crossing went bankrupt in January, McAwful dismissed criticisms by telling CNN that the firm's share price "continued to go way up after I sold my stock." Like he was unconcerned at the cash-out price.
Wait a sec.
What price did McAwful pay in 1997 (before GX's March 1999 2-for-1 split) when he made his original so-called investment of $100 thou?
If he sold at GX's split-adjusted peak share price of $128.50 — which he claims he did not — he would have paid 71 cents per share in 1997 in order to pocket a return amounting to 180-fold profit.
If he sold at substantially less than the split-adjusted peak price of $128.50 — as claimed — then he had to have purchased his shares in 1997 at substantially less than 71 cents each.
By golly, methinks this is another case for the SEC, the FBI, the Congress, maybe even {{{shudder}}} the taxman.
Hey it was only $734 million. Besides Winnick is a big time donator to the Clintons, the DNC, McAulfle, abortion, gay predator rights and other important perverted issues. Besides, all this petty politics will never feed a starving chile er chilrun.
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