Global chairman pledges money for workers

$25 million surprise offer leaves some skeptical

October 02, 2002|By Elizabeth Douglass | Elizabeth Douglass,SPECIAL TO THE SUN

A pledge by Global Crossing Ltd. Chairman Gary Winnick to cover the losses of employees who invested in company stock was welcomed by some yesterday, but others said the surprise gesture would do little to placate angry workers, shareholders and creditors.

Winnick made the $25 million offer during five hours of harsh questioning from federal lawmakers, who were focused on allegations that Global Crossing used improper accounting to hide the company's precarious financial condition from the public while insiders, including Winnick, reaped millions through stock sales.

Members of the House Energy and Commerce Committee's oversight and investigations panel were caught off guard. "You just shocked a lot of people, and you should be proud of that," said Rep. James C. Greenwood, a Pennsylvania Republican who chairs the subcommittee.

Skeptics viewed Winnick's move as an attempt to "inoculate" himself from continuing investigations into the company and into his sale of $124 million in stock May 23 last year after insiders warned of problems. All told, Winnick cashed out about $734 million in Global Crossing stock. The $25 million is 3.4 percent of that.

"He's hoping that it will seem to be enough of a contrite gesture that he will appear to share the pain," said Nell Minow, editor of the Corporate Library, a Web site devoted to corporate governance. "But he's got a lot more left over once that is gone, and I don't think the government will be satisfied with that."

Noting that Winnick also challenged other executives to "step up and write a check," Minow said chief executives under scrutiny for questionable transactions probably are watching Winnick's pledge "to see if it works."

Global Crossing workers had mixed reactions.

The offer from Winnick "is like having somebody pick your pocket and then offering to give you back the lint," said Michael Nighan, who has led a group of former employees trying to recoup millions in cutoff severance pay.

"I was shocked and pleased," said an employee who asked not to be named. "I guess there are those who would say that he's doing this to save his reputation, but no one else has come forward with this kind of gesture, and there are many CEOs in a similar position."

Winnick has been criticized for selling shares and for spending lavishly on a mansion in Bel-Air, Calif., as his company crumbled.

Winnick's testimony was preceded by that of Lenette Crumpler, who works at a company purchased by Global Crossing. Crumpler, a single mother with 31 years of service, blamed her loss of $86,000 in 401(k) holdings on "men of gluttonous greed."

The $25 million is meant to cover the amount Global Crossing employees invested in stock through the company's 401(k) investment plan. Critical details remain to be worked out.

Winnick attorney Terry Christensen dismissed claims that Winnick's offer was insincere.

He said Winnick discussed the idea with him several months ago but that the plan was rejected. Christensen said he did not know that Winnick had decided to go ahead with it until he announced it yesterday.

Elizabeth Douglass is a reporter for the Los Angeles Times, a Tribune Publishing newspaper.

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