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TELECOM'S LATEST TUMBLE

Global Crossing Rescue Attempt Will Test Winnick's Acumen

Executive: His reputation and investors' faith are on line after bankruptcy filing by the formerly highflying company.

January 29, 2002|P.J. HUFFSTUTTER and KAREN KAPLAN | TIMES STAFF WRITERS

In a city of excessive riches, Gary Winnick once ruled as king.

The former furniture salesman from New York became the wealthiest man in Los Angeles, paying $94 million for a Beverly Hills mansion, collecting private jets and schmoozing with the British royal family. He reached that pinnacle by doing what many believed was impossible: raising $20 billion to build an audacious undersea phone network despite having virtually no experience in the telecommunications industry.

Now that network and the riches that came along with it are in doubt as Winnick's company, Global Crossing Ltd., on Monday became the largest telecom firm in U.S. history to file for bankruptcy. The company has its corporate offices in Beverly Hills.

The burly 54-year-old couldn't stave off financial collapse in the face of a glutted market and a worldwide collapse of the high-tech economy, which swept away demand for such services and left the company buried under a mountain of debt.

Now Winnick, whose business prowess is both admired and feared, is facing the most formidable sales job of his storied career: rehabilitating his reputation and salvaging investor faith in Global Crossing.

Winnick has faced adversity in business before. At the helm of a private investment firm, he was unable to prevent the twin bankruptcies of a furniture retailer and a mattress company he had purchased in the late 1980s. Before that, he was caught up in the controversy surrounding Michael Milken and his notorious bond-trading firm Drexel Burnham Lambert, where Winnick worked for 13 years.

Winnick's gruff style and penchant for firing chief executives cut an intimidating figure in the business community. But those who have followed his career aren't ready to count him out.

"He's going to land somewhere, he's going to make money again, and we all want a piece of it," said one Los Angeles-based investment banker, who declined to let his name be used for fear of being left out.

For his own part, Winnick is unwilling to concede any defeat in the face of Global Crossing's mammoth bankruptcy. In the course of constructing a worldwide network connecting 27 countries on four continents, Global racked up $12.4 billion in debt. But Winnick plans to keep the company operating under a proposed reorganization plan that includes an infusion of cash from Asian investors.

"Sometimes it takes the markets time to catch up to visionary ideas, and [Winnick] is confident that the markets will eventually recognize the value of the business," said Winnick's spokesman, Michael Sitrick.

On a personal level, Global Crossing's bankruptcy won't leave the company's founder and co-chairman empty-handed. Over the last four years, Winnick has sold about $602 million worth of stock, according to a review of regulatory filings by Thompson Financial/First Call.

The proceeds of those sales financed a lavish lifestyle and allowed Winnick to become one of the most generous philanthropists in Los Angeles. In the last three years, he has contributed more than $100 million to causes ranging from the Special Olympics to the Los Angeles Zoo. A $40-million gift to the Simon Wiesenthal Center is being used to build the Winnick Institute Jerusalem, a 3-acre center in Israel designed by renowned architect Frank O. Gehry that is dedicated to promoting human dignity and understanding between people of different faiths.

That's a far cry from Winnick's modest roots in Roslyn, N.Y., where his father, Arnold, owned a food service equipment business and his mother, Blanche, was a homemaker and interior decorator. His father's company went bankrupt in the 1960s, and he died of a heart attack in 1966 when Winnick, the youngest of three siblings, was 18.

His mother gave Winnick his father's wedding band. He slipped the diamond-and-ruby band onto his right hand, where it still rests today.

"He's a man who keeps his word," said Lodwrick Cook, co-chairman of Global Crossing. "I think he got that from his family."

Winnick went to college close to home at Long Island University's C.W. Post campus. In 1972 he joined the staff of Drexel and eventually moved to California. During his tenure at the company, Winnick rose from bond salesman to an executive and top aide to Milken.

Winnick left Drexel in 1985, a few years before it collapsed amid legal troubles. After Winnick left Drexel, he formed a private investment company called Pacific Asset Management with financial help from Drexel executives.

When Milken was charged with breaking securities laws, Winnick was subpoenaed by a federal court to testify in the case. The case never went to trial because Milken reached a settlement with federal prosecutors.

Winnick's investment firm, later renamed Pacific Capital Group, dabbled in real estate and health care. But after he dispatched one of his lieutenants to a meeting with AT&T Corp., Winnick turned his attention toward telecom.

"Telecommunications looked like the wave of the future," said Cook, who was among the first 10 employees. "It was exciting to be a part of it."

Global Crossing's rise admitted Winnick to the city's elite circles. His investment firm paid $41.5 million for the ornate former MCA building in Beverly Hills and installed its name in gold on the green metal gates. Inside the building, which is modeled after an Italian villa, Winnick's office is a replica of the Oval Office.

At its height, Global Crossing was worth $55 billion, making him the richest man in Los Angeles in 1999. Today its value has sunk below $120 million. As of Monday, Winnick's remaining 9% stake was worth a mere $10.8 million.

"Had it worked out, people would have said this guy was a visionary," said Jonathan Rosenthal, a partner at Saybrook Capital, a Santa Monica investment bank. "But, it didn't."

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Times staff writer Christine Frey contributed to this report.

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