[WSJ: From Rabbis to Former Presidents, Investors Find Gold in Global Crossing]
Former President Bush was born with a silver foot in his mouth, the Democrats used to quip. Now, it turns out that he also has a golden tongue.
The ex-president last year gave what undoubtedly is the highest paid speech made by anyone, anywhere. After addressing customers in Tokyo on behalf of Global Crossing Ltd., then a fledgling telecommunications start-up, Mr. Bush agreed to take shares of stock in lieu of cash for his $80,000 fee, according to people close to the situation.
The stock's value today: about $14.4 million.
Mr. Bush, who is a regular on the celebrity-speaker circuit, was invited to Tokyo by his buddy Lodwrick M. Cook, a Global Crossing co-chairman and the former chief executive of Atlantic Richfield Co., and by Gary Winnick, also co-chairman of Global Crossing. Mr. Bush, who ironically was hardly known as a great political orator and sometimes made jokes himself about his speaking style, generously gave them a 20% discount on his normal fee of $100,000 for overseas trips.
But sitting at breakfast at the Hotel Okura with Messrs. Winnick and Cook the morning after the speech, Mr. Bush expressed curiosity about the company, prompting Mr. Winnick to suggest that Mr. Bush take his fee in the form of stock in their nascent concern, which wasn't even publicly traded at the time. Mr. Bush agreed, according to the people close to the matter. "He made a good decision," says Mr. Cook, a contributor to Republican causes.
Make that a great decision.
Mr. Bush, through a spokesman, won't say anything about the fee he received, or whether it came in the form of stock. "Given it is like any other speech where we don't talk about his honorarium, we're not going to have any comment on what he did or did not receive in the way of payment," explains the Bush spokesman. But some of the stock is believed to have been earmarked to preserve the Bush family vacation home in Kennebunkport, Maine.
Global Crossing, which went public last August, has seen its stock price increase about fivefold, becoming the latest company you've never heard of to make a legion of new billionaires and millionaires. It took WorldCom Inc., a standard-bearer for telecom growth stocks, 10 years to get to $30 billion in market cap. It took Global Crossing, which this week made headlines by agreeing to acquire Frontier Corp., less than 10 months to achieve the same market valuation, counting the value of Frontier.
The stock, after recently splitting 2 for 1, has gone from $9.50 a share to a high of over $60, and changed hands yesterday at $48, up 87.5 cents. Investors have bid the shares up partly on concerns about not missing the next WorldCom, but also because Wall Street has given lofty valuations to emerging telecom companies that are investing in construction of new networks to handle the burgeoning data traffic created by the Internet.
None of the original investors, including President Bush, have sold shares in Global Crossing, according to people familiar with the situation.
Global Crossing isn't a typical create-a-high-tech-company-in-a-garage story. Its huge run-up in stock price has given huge windfalls to secretaries, famous architects, former presidents and rabbis, while making the rich -- such as the Tisch family of New York's CNA Financial Corp., Mr. Winnick and others -- even richer.
CIBC Oppenheimer, for example, has seen its initial $30 million stake, taken in low-price shares well before the public offering, balloon to $4.6 billion, with 30 members of the high-yield department getting nearly 30% of that.
The Tisch stake of about $10 million is now valued at $1.9 billion, helping offset some earlier family investment miscues during the 1990s bull market, such as betting that the Standard & Poor's 500-stock index would fall.
Mr. Winnick, a Los Angeles financier who worked at Drexel Burnham Lambert Inc. before striking out on his own in 1985, has stock valued at $4.9 billion from an original investment of $15 million. He is the founder and visionary who raised $750 million to build a state-of-the-art fiber-optic network. He quickly brought on Mr. Cook, 70, who himself has made a cool $225 million on Global Crossing shares in 18 months.
But Mr. Winnick has spread the wealth to a broader group of individuals and investors.
Among the biggest winners is Union Labor Life, an insurance company controlled by a consortium of major U.S. unions. Union Labor Life invested about $8 million before the public offering. The current value of that stake: $1.63 billion.
Michael R. Steed, senior vice president of investment for Union Labor Life, said it was approached about helping to fund the fledgling telecommunications concern because Mr. Winnick had developed a relationship with Union Labor Life on an earlier project, the Playa Vista real-estate development in Los Angeles. Impressed by Mr. Winnick's agreement to use union workers on the project -- plus Mr. Winnick's own considerable investment in the telecom venture -- Mr. Steed agreed to invest.
"The unions do not have any kind of investment like that in their history," says Mr. Steed. "And that money is going to millions of pensioners around the country whose money is invested in ULICO. They're going to benefit."
Mr. Steed, who says his company tends to favor investments that are somewhat more financially conservative, concedes that Global Crossing's meteoric stock performance sometimes gives him a little acrophobia. "Are you asking if I sometimes need oxygen?" he jokes. "I can't tell you that there weren't days that the stock went up and it didn't take my breath away."
What about business making for strange bedfellows, with the liberal union investing in the same company as the politically conservative ex-president? "I like George Bush," he says. "I think he has been a positive influence on the company. That's one of Gary's strengths. He's not afraid of bringing together a diverse group of people."
Other winners: Mr. Winnick's secretary, who has stock valued at about $6.5 million, and his housekeeper, with stock valued at some $500,000. Also, three rabbi friends who bought shares when Global Crossing first went public.
The famous architect, Charles Gwathmey, of Gwathmey Siegel & Associates Architects, invested $100,000 when Mr. Winnick was first raising funds. Mr. Winnick had retained Mr. Gwathmey for the renovation of an apartment in New York City. Mr. Gwathmey shared half with his partner; their combined stake is valued at about $14 million.
"He called me and said, 'I'm starting a company, would you like to buy in,' " recalls Mr. Gwathmey. "I've worked for a lot of very fancy, rich people in my life, and have had long-term relationships. But nobody has ever offered me this kind of opportunity." |
