- The Washington Times - Wednesday, October 2, 2002

Global Crossing Ltd. Chairman Gary Winnick yesterday offered to pay $25 million to compensate employees who lost retirement funds when the giant fiber-optics company went bankrupt.
"I let them down," said Mr. Winnick, a major benefactor of the Democratic Party who reaped $734 million from the sale of Global stock before its demise. He made his surprise offer appearing as the star witness in a day of hearings by a House Energy and Commerce subcommittee.
In contrast to other chairmen and chief executives who have been brought before Congress this year to explain potentially criminal accounting deceptions, including Enron Corp.'s former Chairman Kenneth Lay, Mr. Winnick did not use his right to remain silent under the Fifth Amendment.
He was also the first to try to reimburse employees and shareholders who have lost billions of dollars in the stock market this year as a result of corporate scandals and bankruptcies.
One employee testified before Mr. Winnick's appearance that she lost $86,000 in 401(k) retirement savings because she had invested all her funds in Global stock, taking the company's word throughout 2001 that its finances were sound.
"That's why I held on, believing the statements the Global Crossing executives made when the stock was failing," said Lenette Crumpler of Rochester, N.Y.
Mr. Winnick said he estimated Global employees lost $25 million when the stock became worthless in January after the company filed the world's fourth-largest bankruptcy.
The company he founded, once a darling on Wall Street, was the victim of a vicious, worldwide recession in telecommunications that began two years ago and has resulted in massive layoffs and bankruptcies, he said. That includes WorldCom Inc.'s filing, the world's largest, in June.
"Global Crossing's bankruptcy, based on the facts known to me, is a result not of any fraud, but of a catastrophe that befell an entire industry sector."
Mr. Winnick told the committee he was not aware of the company's deteriorating financial condition before he made a major sale of 10 percent of his stock holdings for $123 million in May 2001, around the time the company started experiencing revenue shortfalls that lawmakers said led it to alter its books.
That amounted to about one-third of the stock Mr. Winnick said he sold during the company's brief existence. He said he continues to hold millions of now-worthless Global shares, like other employees. The stock price climbed as high as $64.25 during Global's heyday.
Mr. Winnick said he took no part in high-level meetings in spring 2001 at which executives warned about lagging revenue. He denied that Thomas Casey, then Global Crossing's chief executive, mentioned looming problems in their almost-daily conversations.
"The suggestion I sold stock based on information not readily available is not correct," he said, contending he relied on the public assurances of the company's health provided by Mr. Casey and others.
Mr. Winnick said he learned of the company's problems in June 2001, when general counsel Jim Gorton told him that new financial information would force the company to revise its guidance to Wall Street and close the window for executives to sell shares.
"I remember being very upset, rightfully so," he said. "I remember Tom [Casey] being visibly shaken and in fact turning white. That's the first I heard of it."
Mr. Gorton testified that he told Mr. Winnick and others the company would have to take a restructuring charge at a June 13 board meeting. Mr. Casey did not appear at the hearing because of illness.
Lawmakers questioned Mr. Winnick's accounting of events. Congressional investigators say Global and Qwest Communications started to engage in "sham transactions designed to boost revenues" during 2001 to satisfy the expectations of investors.
Rep. James C. Greenwood, Pennsylvania Republican and chairman of the oversight and investigations subcommittee, said his review of documents and interviews with Global employees showed that Mr. Winnick "was well aware of Global Crossing's strategy to use an ever-increasing number of swaps to meet Wall Street's revenue expectations."
Mr. Winnick and his attorneys said his functions mainly were ceremonial and he was not involved in the company's day-to-day affairs. He did help to negotiate high-profile deals needed to expand the company's business, however.
Documents released Monday show Mr. Winnick tried to bolster his company by closing $400 million in deals in the last half of June 2001, including reaching out to energy giant Enron Corp., which traded in telecommunications bandwidth as well as energy.
"I spoke to [then-Enron chief executive] Jeff Skilling and there are three people vying for the business we're one of them," Mr. Winnick wrote in an e-mail to Mr. Casey that month.
Other Global executives appearing before the committee yesterday denied they pushed for deals that had no purpose other than increasing revenue.
Their testimony contradicted internal e-mail and testimony from lower-level executives before the committee last week, which told of intense pressure from Mr. Casey, Mr. Winnick and others to make deals that would enable Global to meet Wall Street revenue targets.
Qwest has admitted it made some questionable swaps of capacity on its network and announced last week it was reversing about $950 million in revenue booked from swaps. It also may have to adjust $531 million more in revenue from other sales.
Joseph Nacchio, Qwest's former chief executive, testified that he would have vetoed any transaction aimed solely at inflating revenue, however.
"To my knowledge, every purchase of capacity by Qwest was with the intent of furthering the company's business plan," he said.
Mr. Nacchio, pressed by committee members, declined to take up a challenge by Mr. Winnick to compensate his employees for depleted retirement funds. He said his company is not bankrupt, its pension plans are still viable, and he aims to keep it that way.

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