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.
Heard his name mentioned but don't have any details.
Hope you are right, Liz!
Jeepers, you are so right. I better concentrate on the larger issues.
Good ol' Terry, the "friend to the working man," grabbed his cash in hand like Winnick himself did, before the house of cards collapsed leaving workers and their pensions holding a big, fat, empty bag. Oh, Terry DID do one thing to "earn" his $18 million -- he arranged for a three-hour face-to-face meeting between Clinton (him) and Winnick on a golf course.
Terry should have already be disbarred and in jail for taking a $364,000 bribe from Prudential Insurance. The company pleaded guilty to paying the bribe and paid a fat fine. Terry was never even investigated much less charged, since Janet ("the Just") Reno was Attorney General at the time.
So, every time you hear the name "Global Crossing," be sure to think of "the $18 million dollar man," Terry MacAuliffe.
I discuss Terry's exploits, fondly of course, in my latest book, second link below.
Congressman Billybob
Just out of curiosity....why doesn't congrees leve this stuff to the SEC?
YEEEESH...that was SUPPOSED to be "why doesn't congress leave this stuff to the SEC?"
Must be about time to get off this thing.
Don't you just love it when they say, "Not a shred of evidence.."?
Yep...now we know what happened to the evidence, at least. Not that it helps. Let's just hope they missed something.
Timing is everything. Gee, an election on the horizon? Some dumb dims are busy asking themselves- why did we pursue Enron in January?
---max
Yeah, that'll happen. I'm sure Trentie the Fairy Lott is getting right on it. He's such a streetfighting scrapper; I'm sure the 'Rats are sweating bullets right now.
Poofter Boy'll take 'em to the mat, just watch.
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