I'm hoping the Enron mess goes away, but then we've got the Global Crossing mess to contend with next.
How did the fibre optics industry create such scams?
>>Saturday, February 16, 2002
By SIMON AVERY
THE ASSOCIATED PRESS
LOS ANGELES -- Global Crossing Chairman Gary Winnick controlled companies that had lucrative dealings with the fiber optics network firm before it imploded, regulatory filings show.
The special relationships between the firms added an undisclosed amount to the personal profits of Winnick, who sold $734 million worth of stock before the company began bankruptcy proceedings on Jan. 28.
The dealings involved Global Crossing paying millions of dollars to a privately held merchant bank and its subsidiaries founded and controlled by Winnick.
The fees paid to Winnick through Pacific Capital Group Ltd. and its subsidiaries covered real estate leases, corporate aircraft fees and financial advice, according to documents filed with the Securities and Exchange Commission.
Global Crossing is formally based in Bermuda, although Winnick and other top executives work out of Beverly Hills, Calif.
In Washington, a spokesman for the House Energy and Commerce Committee, which is investigating the collapse of Enron Corp., said yesterday the panel has begun looking into the Global Crossing affair.
"It's inevitable we're going to do something" related to Global Crossing, said the spokesman, Ken Johnson.
The nation's fourth-largest bankruptcy has gotten scant attention in Washington until now because it occurred around the same time as the largest. But like Enron, Global Crossing was a major player in the capital.
The 5-year-old company, which filed for bankruptcy protection last month, first appeared as a major campaign contributor in 1999 and has made nearly $3.5 million in political donations since then, according to the Center for Responsive Politics, which studies money in politics. Enron and its executives gave $2.9 million in the same period.
Lobbyists have been paid more than $4 million, and Global Crossing's leaders have relationships with politicians in both parties, including two former presidents. Former Defense Secretary William Cohen sits on Global Crossing's board.
Global Crossing's campaign contributions have come in large chunks -- unregulated soft money to both parties, favoring Democrats but not to the extent that Enron directed its money to Republicans.
A second House committee may look at Global employees' retirement accounts, which were frozen as company stock took its last, steep plunge.
Even as Global's stock price was hovering just above $1 a share in December, the company's political action committee was giving $2,500 apiece to Democratic Sens. Tom Harkin of Iowa and Carl Levin of Michigan and $500 to Rep. Robert Ehrlich, R-Md.
Those contributions capped a year in which Global gave campaigns more than $700,000, most of it in soft money. In late March, Global sent $100,000 in soft money to the National Republican Congressional Committee, the campaign organization for House Republicans. A week later, the Democrats' Senate campaign fund got $25,000. In June, Democrats received $75,000 while the GOP took in $110,000.
During the presidential campaign, George W. Bush received $68,950 in Global contributions.
What did Global Crossing expect for its money? Nothing, said Rebecca Yeamans, a company spokeswoman. "We share a strong commitment to being corporate citizens and part of that is being part of the political process," Yeamans said.
No one in Congress has gotten more from the company than Sen. John McCain, R-Ariz., formerly the chairman and now the ranking Republican on the Senate Commerce Committee. McCain collected $31,000 from Global Crossing employees for his presidential campaign in March 1999. That same month, McCain, at the company's urging, asked the Federal Communications Commission to encourage the development of undersea cables for transmitting telecommunications signals.
The company's largest payout to a lobbyist was the $2.5 million it paid Anne Bingaman, a former antitrust official in the Clinton administration.
Bingaman, the wife of Sen. Jeff Bingaman, D-N.M., said she dealt with the FCC and executive branch agencies on issues related to Global's core business: undersea fiber optic cables. "I did not make presentations to nor lobby any members of Congress or staff," she said.
Global paid Bingaman in cash and stock options, she said. When she sold most of her company stock in January 2000, she posted a profit of more than $1 million, according to her husband's financial disclosure report.
Company founder Gary Winnick has golfed with President Clinton, an outing arranged by Terry McAuliffe, a political fund-raiser who now is chairman of the Democratic National Committee.
Winnick offered McAuliffe a chance to invest in the company early. McAuliffe invested $100,000, which blossomed into a nearly $18 million profit when he sold his stock in 1999 on the recommendation of his broker, said Jennifer Palmieri, McAuliffe's spokeswoman at the DNC.
Bush received a reported $80,000 worth of Global stock options for a speech he made in Tokyo in 1997. At one point, that holding was worth $14.4 million, according to The Wall Street Journal. It is not known whether Bush sold the stock.
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