Global's Ex-Chief Demands Back RentOct 15, 2002 | Los Angeles Times
A former chief executive who served just seven months at the helm of Global Crossing Ltd. is pressing the company to cough up back rent on a Park Avenue apartment and salary payments he says are owed to him.
The $822,000 request from Leo J. Hindery Jr., who served as Global Crossing's third CEO, includes payments to cover the $22,000 monthly rent on his former two-bedroom apartment in the Waldorf-Astoria, known for its famous tenants.
Hindery moved out of the apartment in June. But his motion for payment, filed Friday in Bankruptcy Court, is bound to draw additional attention to the telecommunications firm's penchant for offering top officers lucrative pay packages, perks and severance agreements. The request will be considered at a hearing set for Oct. 24.
The Justice Department and the Securities and Exchange Commission are investigating accounting issues and executive stock sales at Global Crossing, which filed for bankruptcy protection Jan. 28. The company, which had offices in Beverly Hills, built a worldwide fiber-optic network but was unable to cover its debt when it was dragged down by an industrywide slump.
Hindery was not CEO during the period being investigated, and his stock options were primarily in GlobalCenter, a Web-hosting subsidiary. Most of his options became worthless before he was able to exercise them.
Five chief executives, including current CEO John Legere, collected generous salaries, a variety of perks and millions of dollars in forgiven loans from Global Crossing since its founding in 1997. Hindery is the only former CEO to take payment of his severance package in monthly installments, and thus is the only former top officer still owed payments.
Global Crossing stopped payments to Hindery as well as to thousands of laid-off employees also owed severance after submitting its Chapter 11 filing.
Since then, the company has laid off thousands of workers, shuttered offices and canceled scores of contracts with suppliers, landlords and others.
In an August filing in Bankruptcy Court, Global Crossing sought the court's permission to cancel its contract with Hindery. Global Crossing declined to comment Monday on the Hindery matter, but said in the filing that abandoning the severance deal "is a good business decision" that benefits the company and its creditors.
Hindery was Global Crossing's chief executive for seven months. Upon his departure in October 2000, Hindery agreed to be available to consult with the new CEO, and the company agreed to pay rent on his apartment until this month.
In lieu of a lump-sum severance payment, the company also agreed to pay Hindery nearly $1 million annually until the end of this year.
Hindery declined to comment.
Philip S. Khinda, an attorney representing Hindery, downplayed his payment request, calling it "a routine filing ... just like the scores of filings made by others in the course of administering this bankruptcy."
In all, Hindery is seeking payment of amounts that should have been paid in 2002, including $113,381 in rent through June and more than $708,000 in overdue severance.
Although the requested payments loom large for a firm in bankruptcy, they are small compared with the amounts Global Crossing has handed over to other executives.
Legere is being paid $5.3 million a year in salary, bonuses and retention pay, and has been paid about $7 million in a signing bonus and tax payments. In January, the firm paid him $4.8 million to cover taxes on a $15-million loan that was forgiven by sister firm Asia Global Crossing.
Tom Casey, who succeeded Hindery as CEO, held the post for a year before he was replaced by Legere. Casey was paid about $13 million in 2000, including a lump sum of nearly $3.5 million in severance.
Before becoming CEO of Global Crossing, Hindery served as CEO of the company's GlobalCenter Web-hosting subsidiary. After resigning from Global Crossing, Hindery stayed on at GlobalCenter to help complete its sale to Exodus Communications Inc. in early 2001.
Hindery was offered options worth 5% of GlobalCenter, but they were rendered worthless when the unit scrapped plans for an initial public offering and was bought by Exodus Communications, a company that subsequently filed for bankruptcy.