Fishy accounting practices; executives and directors cashing out for millions while employees and shareholders see their investments wiped out; investigations by Congress, the Securities and Exchange Commission and the Federal Bureau of Investigation-no, this isn’t Enron we’re talking about, but rather Global Crossing, which had the good luck to implode after Enron and thus take second billing in the nation’s awareness of corporate malfeasance. But Enron’s corrupt dynamic duo of Ken Lay and Jeffrey Skilling have got nothing on Global Crossing chairman Gary Winnick, who, like them, belongs in jail for the way he led employees and shareholders into financial ruin while he sucked hundreds of millions of dollars out of Global Crossing before it filed for bankruptcy in January with $12 billion of debt.
As an example of callous, cold-blooded greed, Gary Winnick is hard to match. He misled employees and shareholders while he stuffed his own pockets, not caring whose lives he destroyed as he enriched himself in a sickening display of gluttony and venal avarice. All told, Global Crossing may be the most outrageous overreach in corporate history; in our judgment, even more than Enron.
Mr. Winnick, a well-trained acolyte of disgraced junk-bond king Michael Milken, had already acquired a reputation as an arrogant and flashy manager when he founded Global Crossing in 1997. Riding the telecommunications hype of the 1990′s, the company built the world’s largest fiber-optic network, transmitting text, data, video and voice among 27 nations. From the time the company went public in 1998 to when it went bust, Mr. Winnick sold $734 million worth of Global Crossing shares. And he made sure everyone knew it. He bought a $92 million estate abutting the Bel Air Country Club, spent hundreds of thousands of dollars redecorating the company’s offices, gave a Rolls Royce as a gift to a top executive, and demanded that the company maintain a fleet of five jets, including a Boeing 737. During a 1999 meeting, as recently reported by The NewsHour with Jim Lehrer, Mr. Winnick gloated, ÒThe company has experienced remarkable growth. Mornings I wake up, I look in the mirror and I say to myself, ‘What happened here?’Ó
But Mr. Winnick’s self-examination was only skin-deep: When the company started to report earnings losses and spiral downward last year, he and other Global Crossing executives kept employees and shareholders in the dark while they greedily cashed in hundreds of millions of dollars of stock. According to The NewsHour, corporate insiders sold their stock for a total of $1.5 billion. Fat paychecks for top management were the norm. Last year, after the company announced layoffs of 2,000 employees, Mr. Winnick hired a new chief executive-his fourth in four years -named John Legere, and gave him a $1.1 million salary, a signing bonus of $3.5 million and a promised annual bonus of $1.4 million. Mr. Legere recently had the chutzpah to say to Congress, ÒLet us be clear: Global Crossing is no Enron.Ó
Meanwhile, Mr. Winnick had tried to cover his political bases. Terry McAuliffe, Bill Clinton’s best friend and chairman of the Democratic National Committee, turned a $100,000 investment in Global Crossing into $18 million. Global Crossing donated over $200,000 to Governor George Pataki and New York Republicans, and Mr. Winnick himself gave $20,000 to New York State Comptroller Carl McCall, who just happened to invest $63 million of the state public-employee pension fund in Global Crossing. That money is now gone; Mr. McCall, trying to cover his back, claims he is outraged and will sue. Mr. Winnick also tried to buy his way into New York’s cultural circles, giving $5 million to the Museum of Modern Art and loudly telling associates that the museum’s chairman emeritus, David Rockefeller, was his Ònew best friend.Ó
Perhaps the most heinous chapter in the scandal involves a Rochester, N.Y.–based phone company, Frontier Corporation, which Global Crossing bought in 1999. Large portions of the 401(k) plans of many of Frontier’s employees-solid middle-class people struggling to keep up-were subsequently invested in Global Crossing stock, and as a result their retirement savings are now worthless. Mr. Winnick and his cronies might just as well have broken into their homes and looted their belongings. And many of the 9,000 Global Crossing employees who lost their jobs have said that promised severance payments never materialized and health benefits were abruptly cut off.
Having presided over one of the worst beatings that shareholders and employees ever received, Mr. Winnick seems unperturbed. He’s in the middle of a $15 million renovation of his Bel Air home. If he had a conscience, he would be haunted by his own words: ÒWe’re not going to be the Flying Wallendas in the business,Ó he said in 1999. ÒWe have a big responsibility to our shareholder base and to our employees. And we’re never going to violate that.Ó
Thousands of employees and shareholders are feeling the effects of Mr. Winnick’s Òresponsibility.Ó Now the only responsible thing to do is to put Gary Winnick behind bars.
Manhattan Crime Rate At 19th-Century Level
In the last days of Rudolph Giuliani’s administration, there was much discussion of whether the city’s record drops in crime would continue under a new Mayor.
Three months into Michael Bloomberg’s Mayoralty, we have our answer: Crime continues to go down, and the Police Department, under the leadership of Commissioner Ray Kelly, continues to be among the world’s most innovative and efficient crime fighters. That’s excellent news, and it bodes well as the city rebuilds after the horrors of Sept. 11.
Statistics released in late March show that murders in Manhattan are down 70 percent-yes, 70 percent. As of mid-March, there had been just eight murders in Manhattan in 2002. That’s the lowest number since the late 19th century. Can such a low number be sustained in the 21st century? Why not? A decade ago, who would have predicted that the city’s murder rate would drop to 1960′s levels? There can no longer be any doubt that New York is the nation’s safest big city.
Nor can anyone deny that New York’s Police Department has put its resources to brilliant use. Under Mr. Kelly, the department is updating its technology to allow for better use of computers in fighting crime. He has asked private consultants from I.B.M., Deloitte Consulting and Merrill Lynch to take a look at the technology with an eye toward several improvements, including hand-held devices for beat cops so they can check criminal records of suspects.
The efforts of Mr. Bloomberg and Mr. Kelly to keep crime down undoubtedly will have happy consequences not only in terms of public safety, but in economic terms as well. The words Òlow crimeÓ and Òeconomic developmentÓ go together. In that regard, the city could do a better job of touting New York’s new image as the low-crime capital of urban America. City Hall ought to broadcast all this good news in an aggressive pitch around the nation and overseas. Low crime makes New York not only more attractive for visitors, but for young people and families looking for new homes. Money invested in selling New York’s new image is money well spent.
Follow NYO Staff via RSS.