Gary Winnick, the founder and former chairman of Global Crossing Ltd., must defend against claims that he and 22 former executives fraudulently misrepresented the fiber-optic company's finances, a federal judge ruled.
A group of banks led by J.P. Morgan Chase & Co. sued Winnick in October for $1.7 billion, claiming he and the other ex-executives engaged in a "massive scam" to conceal Global Crossing's decline so it could borrow $2.25 billion two months before its collapse in 2002.
U.S. District Judge Gerard E. Lynch in New York on Tuesday denied the defendants' request to throw out the suit, saying it wasn't clear whether the banks should have uncovered the alleged fraud. The judge's refusal to dismiss the fraud claims means Winnick and the others may face a jury trial.
The judge dismissed negligent-misrepresentation claims against Winnick and the other defendants, saying the banks failed to show that the defendants had any special relationship with the banks that would create heightened legal responsibility.