Global Crossing Chairman, Qwest Executives Testify About Controversial DealsOct 1, 2002 | AP
Global Crossing Ltd. Chairman Gary Winnick said Tuesday he was not informed about the fiber optic company's deteriorating financial condition before he sold $123 million in stock.
Winnick said he took no part in high-level meetings in the spring of 2001 at which executives warned about lagging revenues. He denied that Thomas Casey, then Global Crossing's chief executive, mentioned looming problems in their near-daily conversations.
"The suggestion I sold stock based on information not readily available is not correct," Winnick told a subcommittee of the House Energy and Commerce Committee.
Winnick defended his sale of 10 percent of his Global Crossing holdings in May 2001 as appropriate. Winnick said he relied on the public assurances of the company's health provided by Casey and others.
Last week, a former Global Crossing executive testified to the same panel that he knew Casey's comments to the public were misleading.
Rep. Billy Tauzin, R-La., the committee chairman, told Winnick his stated ignorance of the financial condition of the company he founded was "a little hard for us to understand."
"The head of the company is about to make a sale and he never hears any of the warnings," Tauzin said, noting that Global Crossing stock started a slide around the time of the sale that ended in the company's bankruptcy filing in January.
Congressional investigators are looking into whether Global Crossing and Qwest Communications engaged in "sham transactions designed to boost revenues" and thus give investors and financial analysts a misleading picture of the companies' financial health.
Winnick is one of five current and former Global Crossing executives testifying at the congressional hearing Tuesday. Qwest Communications chief operating officer Afshin Mohebbi and former chief executive officer Joseph Nacchio also were scheduled.
The committee earlier heard from a Global Crossing employee who lost her entire $86,000 retirement savings.
Lenette Crumpler of Rochester, N.Y., said she believed in Global Crossing because its executives provided frequent reassurances.
"That's why I held on, believing the statements the Global Crossing executives made when the stock was failing," Crumpler said.
Documents released Monday show Winnick was involved in trying to bolster his company by June 2001, shortly after the stock sale, the last of several sales that brought him $734 million.
Global Crossing has since been bought by two Asian companies for $250 million, a fraction of the $22 billion in assets listed in the bankruptcy filing.
Rep. James Greenwood, R-Pa., the investigative panel's chairman, said his committee's review of documents and interviews with Global Crossing employees have established that Winnick "was well aware of Global Crossing's strategy to use an ever increasing number of swaps to meet Wall Street's revenue expectations."
Lawyers for Winnick and the company have consistently painted a picture of a ceremonial chairman who was not active in day-to-day affairs, including the company's participation in swaps of capacity between telecommunications companies, said Ken Johnson, spokesman for the House Energy and Commerce Committee.
Qwest said last week it was reversing about $950 million in revenue booked from swaps of capacity on its network and may have to adjust $531 million more in revenue from other sales.
Winnick's efforts to bolster his fading company included reaching out to Enron Corp., the energy-trading company that also traded telecommunications bandwidth, and other companies to help Global Crossing close $400 million in deals in the last half of June 2001. "I spoke to (then-Enron chief executive) Jeff Skilling and there are three people vying for the business â€¦ we're one of them," Winnick wrote in an e-mail to Global Crossing chief executive Thomas Casey in June 2001.
In June 2000, before the glut of fiber-optic capacity soured investors on Global Crossing and other companies, a Global Crossing executive told Winnick, Casey and co-chairman Lodwrick Cook that they should move quickly to sell the company.
"The stock market can be fooled, but not forever, and it is fundamentally insightful and always unforgiving of being misled," wrote Leo Hindery, who briefly served as Global Crossing's chief executive.