Posted on 08/31/2002 4:52:27 AM PDT by Libloather
Global Crossing Chief's Lawyer Defends Stock Sales
Fri Aug 30, 2:02 PM ET
By Jeremy Pelofsky
WASHINGTON (Reuters) - Stock sales by Gary Winnick, founder and chairman of the now-bankrupt Global Crossing Ltd. , were appropriate and not based on inside information, a lawyer for the executive said on Friday.
Winnick sold about $123 million worth of company stock in May 2001 as the telecommunications industry was melting down and Global Crossing was assessing the impact it would have on the fiber-optic network operator, according to the U.S. House Energy and Commerce Committee, which is probing the matter.
"Gary's stock sales were done after obtaining all legal, regulatory and corporate approvals during the trading window in which executives were permitted to sell," Gary Naftalis, Winnick's lawyer, of the firm Kramer Levin Naftalis & Frankel LLP in New York, told Reuters.
"Gary possessed no inside information which prevented him from making his stock sale and indeed he only sold a small portion of what he was allowed to sell," Naftalis said.
The U.S. House Energy and Commerce Committee has been investigating stock sales by Winnick as well as network capacity swaps done by Global Crossing, questioning whether such deals inflated revenue at the Bermuda-based company.
The company told committee investigators that its vice president for finance, Joseph Perrone, was ordered in late May 2001 to assess the outlook for the telecommunications industry and the possible impact on Global Crossing.
Winnick sold some $123 million worth of Global Crossing shares on May 23, 2001, while other insiders sold some $20.6 million in stock that month too, just before the report came back on June 4 that showed it might have to cut its financial forecast, Ken Johnson, a spokesman for the committee, told Reuters on Thursday.
The general counsel then closed the trading window for insiders, but then-Global Crossing Chief Executive Officer Thomas Casey told committee investigators that he received a forecast much earlier, in April 2001, that indicated revenue would be $300 million less than forecast.
"Clearly these allegations raise suspicions about possible insider trading," Johnson said on Thursday. "If Casey was told that there was a possible problem, what did Winnick and others know?"
The committee has also threatened to subpoena Winnick to testify about his sales and the network capacity sales which were also done by other telecommunications companies in the industry up until recently.
"His conduct was totally proper and there isn't a shred of evidence that his stock sales were in any way improper or illegal," Naftalis said. "We've been dealing with the committee on these matters in an appropriate fashion."
The U.S. House Financial Services Committee is also investigating Global Crossing and asked for information on how the company was managed as well as the firm's plan to sell a majority interest to two other companies.
That committee has also asked Salomon Smith Barney, a unit of Citigroup Inc. , to turn over information on whether its employees made available shares in initial public offerings to Global Crossing executives.
'Two for one' special - eh?
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