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As Global Crossing Rebounds, Critics Question Role of CEO

John Legere has been hailed for leading the telecom in tough times, but some reject his image as thrifty outsider.

October 12, 2003|Elizabeth Douglass | Times Staff Writer

Global Crossing Ltd., the telecommunications firm that symbolized the industry's rise, excess and ultimate collapse, may soon emerge as a battered survivor -- a feat few thought possible when the company sought bankruptcy protection nearly two years ago.

The company could wrap up its Chapter 11 reorganization as early as this week, with one man being hailed as the tough-minded executive who made it possible: Chief Executive John J. Legere.

During his two years at the helm of Global Crossing, the 45-year-old executive has guided the fiber-optic network operator through federal investigations, a torrent of lawsuits and bad publicity, as well as a precipitous drop in telecom spending.

Legere (pronounced Ledger) fired more than 3,000 workers, canceled contracts, slashed operating expenses by 40% in his first year and abandoned 279 offices -- including the company's posh former headquarters in Beverly Hills.

Yet despite Legere's carefully cultivated image as a penny-pinching outsider, a yearlong series of more than two dozen interviews with current and former Global Crossing employees and a review of hundreds of documents reveal that he was not always such a careful steward. What's more, they show that Legere's fortunes rose as Global Crossing's fell.

Specifically:

* During his nearly four-year affiliation with Global Crossing and its Asian subsidiary, Legere approved many of the controversial "capacity swaps" that triggered federal investigations and contributed to the company's downfall. A panel of outside directors called the company's reliance on such deals "not a prudent or financially sound business decision."

* Thousands of former employees watched their severance payments vanish, but Legere went to great lengths to make sure he was paid in full. As bankruptcy loomed in 2001, for instance, Legere summoned a vacationing employee to ensure that Global Crossing paid the income taxes on a $10-million personal loan to Legere the company had forgiven.

* Without board approval, Legere spent $500,000 of Asia Global Crossing's money to settle three separate sexual harassment claims against him.

* And even after he shut the flow of free coffee at Global Crossing's new Florham Park, N.J., headquarters to save money, Legere continued to drive a Cadillac Escalade at the company's expense, fly first-class and live in a Mastnhattan apartment that costs the company an estimated $10,000 a month.

Legere and Global Crossing declined repeated requests by The Times in the last year, including one made last week, to discuss the issues and incidents in this story.

Support of Creditors

For their part, Global Crossing's creditors say they are encouraged by the company's progress. Although they stand to get pennies for every dollar they are owed, the group is backing a reorganization plan that calls for Singapore Technologies Telemedia to pay $250 million for a 61.5% ownership stake in the revamped company. The Federal Communications Commission signed off on the deal last week.

With the U.S. Bankruptcy Court's protection, Legere has erased about $720 million in annual operating costs and in 2001 saved about $260 million in salaries alone, according to the company. Legere's smaller Global Crossing has 4,300 employees and operates a worldwide fiber-optic communications network that spans 27 countries and serves 75,000 customers.

"I am very impressed with John," said attorney Ed Weisfelner, who represents a committee of Global Crossing's unsecured creditors. "He deserves a lot of credit for cutting costs and keeping the banks at bay."

Legere is a confident and fit man with slicked-back hair, piercing blue eyes and a general appearance that invites comparisons to actor Christopher Walken. He's an avid, accomplished runner and likes to play basketball with favored managers.

Critics, however, say that he berates and intimidates employees and excludes women from the top ranks. That, in part, led three female employees to accuse Legere of sexual discrimination and harassment in 2001, people familiar with the situation say. Without approval from the board of Asia Global Crossing, where he then worked, Legere paid $500,000 of company money to avoid lawsuits and settle the claims.

Two people familiar with what unfolded say that some Asia Global Crossing directors were upset when they later learned about the settlements. They believed that Legere should have cleared the payments with the board, especially at a time when the company's cash position was so weak.

In interviews and public appearances, Legere has portrayed himself as a relative newcomer to Global Crossing, underscoring his official appointment as chief executive in late 2001 with phrases such as: "When I came on board Oct. 3 ... " or "I came in as the CEO on Oct. 3

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