Compared to Democratic National Committee Chairman Terry McAuliffe, former Enron Chief Financial Officer Andrew Fastow is a piker. Mr. Fastow used an inside track to earn millions of dollars in ill-gotten profits from Enron’s off-the-books partnerships. Mr. McAuliffe turned his $100,000 investment in Global Crossing into a $17.9 million profit or four times the booty Mr. Fastow earned on his investment.
To hear Mr. McAuliffe tell it, “I bought stock, and I sold stock. That’s capitalism, and if you don’t like it, leave the country and move to China.” As the chief fund-raiser for the Clinton re-election campaign, Mr. McAuliffe knows something about China first-hand.
To what extent was Mr. McAuliffe the beneficiary of an insider’s deal? Mr. McAuliffe, after all, was given the opportunity by Global Crossing founder Gary Winnick to buy into the telecommunications firm on the ground floor in 1997. At the time, Mr. Winnick extended Mr. McAuliffe the timely investment opportunity, a cynic might note, the Democratic Party’s chief fund-raiser was universally known as President Clinton’s best (male) friend.
After Global Crossing’s stock went public in 1998, its price soared in the Internet-created stock market bubble, peaking at $64.25 per share. Cashing out his shares and exercising stock options, Mr. McAuliffe netted his astounding capital gains. Then, in 1999, Mr. Winnick found himself playing golf with Mr. Clinton, a priceless outing arranged by the president’s buddy and chief fund-raiser. Mr. Winnick soon pledged $1 million to Mr. Clinton’s presidential library, while his company chipped in more than $1 million in soft money to the Democratic Party during the 1999-2000 election cycle. (As Global Crossing’s stock price was plunging toward 7 cents, the firm tossed more than $400,000 in soft money to the Democrats in 2001 before laying off 2,000 workers last month and cancelling their health insurance.)
In return, Global Crossing was awarded a $400 million Pentagon contract last spring, the fruits of a questionable bidding process that had taken place during the Clinton administration. Indeed, after other bidders bitterly complained, the Bush administration rescinded the contract within a month. Meanwhile, the value of Global Crossing continued its plunge, falling from a market capitalization peak of nearly $60 billion, when Mr. McAuliffe bailed, to virtually nothing by last month. On Jan. 28, Global Crossing declared bankruptcy, essentially destroying all value for its shareholders. But not before Mr. McAuliffe’s benefactor, Mr. Winnick, pocketed $734 million for himself by selling stock that is now worthless.
The Security and Exchange Commission and the FBI have begun separate investigations. And Mr. McAuliffe is brazenly lecturing the world about the merits of capitalism and the evils of Enron. Six days before Global Crossing went down the tubes, Mr. McAuliffe had the audacity to declare, “Enron is a metaphor for the Bush administration. The wealthiest people took their money off the table.” You would think he was talking about his own dealings with Global Crossing.