Billions Already Pocketed, Late Insider Sales Draw Ire

By CONOR DOUGHERTY

Staff Reporter

Insiders at Global Crossing Ltd. sold billions of dollars worth of shares over the course of the company’s three-and-a-half year run, from public offering to last month’s Chapter 11 filing. But while the pace of selling slowed as Global’s share price embarked on its precipitous decline, the last large round of insider selling has raised the biggest questions.

Led by Global Crossing’s chairman, Gary Winnick, insiders unloaded a total of $143 million worth of Global Crossing stock in May 2001, at prices between $11.69 and $15.89, according to Thompson Financial/First Call, a securities research firm. Of that total, Winnick sold shares amounting to $123 million. Lodwrick Cook, co-chairman, and then-President and Chief Operating Officer David Walsh sold about $9 million each.

The last sale by Winnick, who sold roughly $730 million in Global Crossing stock over the three and a half years since the company went public, has drawn the greatest scrutiny. The May 2001 sales came three months before Roy Olofson, then senior vice president of finance, alleged the company was inflating its revenue figures.

Michael Schwartz, an attorney with Wolf Popper LLP in New York, who has filed a shareholder lawsuit against Winnick and other Global Crossing executives, called the sale “troubling,” and the SEC is investigating the allegations.

Winnick spokesman Michael Sitrick said “Mr. Winnick, to the best of the company’s knowledge, like all other Global Crossing individuals covered by Section 16 of the SEC’s trading rules, made their trades in accordance with SEC policies that prohibit trading when individuals have material, non-public information.”

He said all trades were “approved internally by the company’s general counsel. There were no trades within months of the board’s decision to file for Chapter 11 protection.”

While Winnick has been the focal point of investor scrutiny, he is just one on a list of the insiders who made fortunes off Global Crossing’s once high-flying stock.

Thompson Financial/First Call tracked the sales of stock by company insiders from the time of Global Crossing’s initial public offering through to its delisting from the Nasdaq. Sales of shares by executives who left the company are not reported to the Securities and Exchange Commission once they depart, and further sales may have occurred.

The first major insider sale came in August 1998, the month of Global Crossing’s IPO. Together with Winnick, co-founding executives David Lee, Barry Porter and Abbott Brown sold more than $143 million in worth of Global Crossing stock at $19.

For other insiders, the first big opportunity to cash out came nearly a year later, when US West pulled out of a deal to be bought by Global Crossing in June 1999. Global Crossing’s stock had just reached its all time high of $64.25, and as a penalty for backing out of the deal, US West was forced to buy 10 percent of Global Crossing shares for $62.75. Company insiders took advantage of the opportunity, unloading more than $1.5 billion worth of stock. Winnick alone sold shares valued at more than $350 million. Canada Imperial Bank sold shares valued at more than $550 million .

Other big winners in the sale of shares to US West include Loews Corp., whose interests were represented by Hillel Weinberger, a one-time Global Crossing director and member of the audit committee. Weinberger was listed as the beneficial owner of more than 6 million shares for an affiliate of Loews. According to SEC filings, Weinberger sold $228 million worth of stock to US West. Insiders Lee, Porter and Brown sold $78 million, $46 million and $36 million, respectively.

Of those who sold shares up until the time of the Chapter 11 filing, the largest sellers in aggregate after Winnick were Lee, Porter and Brown, who unloaded shares of stock worth about $194 million, $153 million and $70 million, respectively. Lee and Porter went on to found Clarity Partners, a private equity and venture capital firm that focuses exclusively on telecommunication investments. Brown started a private equity firm Ridgestone Corp.