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WINNICK ENDS HIS SILENCE

Reaction Mixed to $25-Million Offer

October 02, 2002|ELIZABETH DOUGLASS | TIMES STAFF WRITER

Global Crossing Ltd. Chairman Gary Winnick's pledge to cover the losses of employees who invested in company stock was welcomed by some Tuesday, 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 firm's precarious financial condition from the public while insiders such as 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 subcommittee Chairman James C. Greenwood (R-Pa.).

Skeptics viewed Winnick's move as an attempt to "inoculate" himself from investigations of the company and into his sale of $124 million in stock on May 23, 2001, after insiders warned of problems.

All told, Winnick cashed out more than $600 million in Global Crossing stock. The $25 million represents about 4% 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 cut-off 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 Bel-Air mansion 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 the 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. Winnick's offer covers only contributions made by employees to the plan, not company matches. At its peak, the plan was worth more than $250 million.

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

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

"If this were designed to stop or slow down or impact any of the other [investigations], I would have told him to save his money," Christensen said.

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