Global Crossing settlement: $325 million

Agreement on suits to benefit employees, investors, 2 pension funds

March 20, 2004|By NEW YORK TIMES NEWS SERVICE

Investors and former workers who lost money and their pensions in the 2002 collapse of Global Crossing Ltd., the telecommunications company, is to receive $325 million in a settlement of a class action lawsuit reached late yesterday.

Gary Winnick, the founder and former chairman of Global Crossing, which spent $15 billion circling the globe with a state-of-the-art fiber-optic network, is to contribute $30 million to the settlement. Simpson Thacher & Bartlett, Global Crossing's law firm, is to pay $19.5 million, even though the firm was not named as a defendant.

The settlement, which is tentative, was approved yesterday by Judge Gerard E. Lynch in U.S. District Court in New York. In about three months, the settlement will be submitted to a final approval hearing before Lynch.

The Pender Insurance Co., which insured the officers and directors of Global Crossing and its affiliate, Asia Global Crossing, are paying the bulk of the settlement.

Under the terms of the settlement, investors who bought Global Crossing securities beginning in 1999 will receive $245 million and former employees will receive $80 million.

Global Crossing was a stock market darling during the technology mania. But in 2001, when it became clear that there were not enough paying customers for the network, the company began its descent. It filed for bankruptcy protection in January 2002, leaving investors and employees, whose pensions were invested in company stock, with billions in losses. It listed debts of $12.4 billion when it filed for Chapter 11.

Winnick made $734 million selling his shares in Global Crossing before it collapsed.

The lawsuit that was settled yesterday was filed in January 2002 by the Public Employees Retirement System of Ohio and the State Teachers' Retirement System of Ohio and later consolidated with other suits against Global Crossing. The suit alleged that a scheme to manipulate Global Crossing's financial results reached to the very top of the company.

The two pension funds lost about $110 million in Global Crossing securities.

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