Global Pressured Employees to Make Campaign Donations

As Global Crossing Ltd. grew from a telecom pipsqueak into a $55-billion fiber-optic giant, company executives sought to gain influence in Washington by showering millions of dollars around the Capitol.

But with Congress deepening its investigations of the company’s business and accounting practices, it is becoming increasingly clear that Global Crossing was far more adept at wringing campaign contributions from employees than it was at disbursing the cash in a politically advantageous way.

Using a combination of persistence and intimidation, Global Crossing’s leaders persuaded employees to pour $3.6 million into Beltway coffers, including $2.8 million in the 1999-2000 election cycle. That placed the company 23rd on the list of top donors to national political parties, candidates for federal offices and political action committees, said the Center for Responsive Politics, a watchdog group based in Washington.

Global Crossing Chairman Gary Winnick personally has contributed more than $300,000 since founding the company in 1997. The funds went to causes and candidates across the political spectrum, from liberal icon Sen. Edward M. Kennedy (D-Mass.) to conservative Senate Minority Leader Trent Lott (R-Miss.).

Winnick, an extravagant financier who spent at least $60 million on a Beverly Hills estate and adjoining property and has pledged more than $100 million to charity, wasn’t the only active political donor at the company. Altogether, 78 Global Crossing executives contributed to Republicans and Democrats during the 1999-2000 election cycle.

“Everybody had to make contributions,” said a former Global Crossing executive who was frequently badgered for donations. “You were permitted to say no, but they expected you to give money.”

Several former executives and employees agreed to talk about the internal fund-raising efforts, but they did not want to be named because they are bound by confidentiality agreements or fear retribution.

Global Crossing spokeswoman Becky Yeamans said that although senior company executives believe that “participating in the political process” is part of being a “good corporate citizen,” employees were not pressured to contribute.

“The decision to support any candidate by individual employees of Global Crossing is entirely voluntary and unrelated to employment,” Yeamans said.

The company and its political action committee together have contributed more than $1.3 million to federal political causes alone since 1997, according to the Center for Responsive Politics, which bases its numbers on federal filings.

More than $150,000 also flowed to Washington from Global Crossing employees through Pacific Capital Group, the private investment firm run by Winnick that shared Beverly Hills office space with Global Crossing.

Bermuda-based Global Crossing, which operates a global telecommunications network, has been under scrutiny since it filed the nation’s fourth-largest bankruptcy in late January. The company’s accounting and other practices are under investigation by the Securities and Exchange Commission and the FBI.

The money-raising machine was simple but effective. Target candidates and causes were handpicked at the highest levels of the company, typically by Winnick, Global Crossing Co-Chairman Lodwrick Cook or former board member Norman Brownstein, a political fund-raiser and longtime friend of Winnick.

When money was needed, a note would be dispatched to a select group of employees, usually managers with relatively high salaries. “There was always a specific amount needed,” according to a person familiar with the practice.

“Typically, a memo would come out and say, ‘We like this person, and this person is a good person, and we should support their campaign. We would like you to contribute,’” said another former executive. “People would say, ‘Can I come and pick up the check?’”

Some executives succeeded in skirting the appeals, but it took guts. The letters usually included the phrase “Gary would like you to

It wasn’t easy. Workers who tried to ignore the memos were visited by Lodwrick Cook’s daughter, Sherri Cook, a Global Crossing attorney.

“Sherri would go into their office and talk to them,” said a person familiar with the practice. “When Sherri Cook came into your office, she wasn’t just someone asking for a donation. She was Lod Cook’s daughter.”

Lodwrick Cook and a spokesman for Winnick did not return calls seeking comment. Sherri Cook said she did not pressure anyone to make campaign contributions. “I believe it’s my duty as a good citizen to educate others about our political process, so that they can exercise their freedom of choice, and I’ve been faithful to that duty,” she said. “In so doing, I’ve always taken great pains to make sure that none of my friends or colleagues felt pressure to contribute to a campaign that I supported.”

Unless an executive explicitly tells employees that they “must” contribute to a political cause, solicitations such as those at Global Crossing are legal, said Larry Noble, executive director of the Center for Responsive Politics and a former general counsel for the Federal Election Commission.

“Often the executives will say, ‘It’s in the interest of the company that we support these candidates,’” Noble said.

A case involving the Machinists Nonpartisan Political League challenged such statements as being inherently coercive. But the election commission dismissed the union’s case and the federal courts upheld the decision, agreeing that the solicitations are allowable because employee contributions are voluntary.

It is illegal for companies to punish workers for failing to give money to favored politicians, but such cases are almost impossible for employees to prove, said another election law expert in Washington.

“The conduct would have to be egregious,” he said. “It’s very difficult, unless you have a smoking gun.”

Global Crossing executives often sought contributions from employees who they knew recently had cashed in profitable stock options. In those cases, the requests contained overtones of a quid pro quo.

“It was like, ‘Hey, you’ve made all this money on stock options, and now it’s time to give back, and Gary would like you to contribute to this person,’” said a person aware of the practice. “If Gary Winnick is the person who made you so much money, you aren’t going to say no, or your career is over.”

One former company executive stressed that it was possible to refuse the requests. “But it’s easier to say yes.... You had to give to Gary’s charities and you had to give to politicians or you’re not really a ballplayer,” the person said.

Company spokeswoman Yeamans denied that the company kept track of contributions by employees.

“Saying there was intimidation or some kind of quid pro quo is really ludicrous,” she said.

Some employees presumably gave of their own volition. Former Chief Executive Leo Hindery Jr., for example, is by far the top Global Crossing giver primarily because of his longtime generosity to the Democratic Party.

“I was a substantial contributor to the Democratic Party and Democratic causes long before my brief tenure with Global Crossing, and I continue to be now,” Hindery said. He added that he “did not lobby or seek political influence of any sort on behalf of Global Crossing and never would have.”

Gifts to Both Parties

But in many cases, the pattern of giving ran counter to party affiliation.

Robert Sheh, a registered Republican now retired from Global Crossing, gave a combined $2,500 to Democratic Sens. Joseph Lieberman, Dianne Feinstein and Bob Kerrey while simultaneously writing checks totaling $10,000 to GOP candidates. Fellow Republican David L. Lee, a company co-founder and former president, contributed $5,000 to the Committee for a Democratic Majority despite giving more than $80,000 to the Republican National Committee and the Republican Party of California. Lee did not respond to a request for comment.

Sheh downplayed his party-switching donations, saying his political giving is rarely based on party affiliation. He added, “I certainly didn’t have my arm twisted” to make those contributions.

Frequently, contributions from many employees were bundled to multiply their political effect. On a single day in June 1999, 24 Global Crossing employees wrote checks totaling $24,000 to presidential candidate George W. Bush. Sen. Conrad Burns (R-Mont.) received $19,500 from a group of 22 Global Crossing workers on Dec. 21, 1999, and Feinstein collected $13,500 from 11 employees on March 7, 2000.

New campaign finance laws that will take effect after the November elections will allow individuals to contribute up to $2,000 per candidate each election cycle, with an overall cap of $25,000. But companies won’t be able to contribute so-called soft money to national political parties. That might make companies such as Global Crossing more dependent on bundled contributions from employees, Noble said.

One former Global Crossing executive agreed with that assessment. With the higher limit for individual donations, he said, “What Global did ... it’s just going to be worse.”

For all its prodigious giving, Global Crossing appears to have reaped few benefits. Especially when compared with the legendary lobbying of its telecommunications brethren AT&T; Corp., Verizon Communications Inc. and SBC Communications Inc., Global Crossing made few visible demands of politicians.

“Global Crossing [executives] never asked for anything; they had no agenda,” said a former company executive. “At least Enron was getting loopholes, they were getting tax breaks. With Global Crossing, it seemed like it was more just to enhance the prestige of some of its big shots.”

And that it did. In addition to gaining entree to exclusive functions, the company frequently landed appearances or taped accolades by political heavy-hitters--among them former Presidents George Bush and Bill Clinton, former Secretary of State Madeleine Albright and Gov. Gray Davis--for Global Crossing events and dinners honoring Winnick.

Global Crossing’s biggest push for federal action came in early 1999, shortly after AT&T;, Sprint Corp., WorldCom Inc. and more than 25 other phone companies teamed up to build a fiber link between the United States and Japan. Global Crossing complained that the consortium violated antitrust laws and that its extensive roster of investors was designed to control critical cable landing sites and soak up potential customers for Global Crossing’s rival system.

To press its case with the Clinton administration, Global Crossing hired high-powered lobbyists, including former Clinton antitrust chief Anne Bingaman. The Justice Department and the Federal Communications Commission agreed to investigate the complaint. Sen. John McCain (R-Ariz.), then chairman of the Senate Commerce Committee, sent a letter to the FCC underscoring the need for an open market in the undersea cable business.

McCain’s May 1999 letter did not mention Global Crossing specifically. But it was written one month after McCain received $14,000 in campaign contributions from Global Crossing employees. McCain became the top recipient of Global Crossing funds in Congress, collecting $31,000.

In a February speech in Los Angeles, McCain said he had been “tainted” by the Global Crossing contributions, which represent an added embarrassment because of McCain’s vigorous push for campaign finance reform. McCain said he expects the Senate Commerce Committee to take up the controversies surrounding Global Crossing when its Enron Corp. proceedings are completed.

Despite Global Crossing’s efforts at the FCC, the rival undersea cable project won approval in November 1999. But the lobbying effort nonetheless benefited the company by delaying the competition, giving Global Crossing a several-month lead in construction.

Lobbying Efforts

In 2000, the company pressed federal officials for a favorable outcome in a long-running dispute between the FCC and NextWave Telecom Inc. over valuable wireless licenses. Global Crossing and Winnick’s investment firm planned to make a large investment in the bankrupt firm if it regained the licenses.

After a key settlement fell through, the license battle has moved to the Supreme Court, and Winnick’s companies are no longer involved.

Late last year, two senators who have collected Global Crossing contributions--Lott ($15,000) and Louisiana Democratic Sen. John Breaux ($1,000)--wrote letters to federal officials questioning the fairness of its system for assessing permit fees for underwater fiber-optic cables. Global Crossing has been fighting a $7.2-million fee by the National Oceanic and Atmospheric Administration, which previously had exacted for the same project nearly $12 million for marine mitigation, monitoring and visitor center construction, according to a company filing.

Funds raised by Global Crossing employees also were used to sponsor an event hosted by the Communications Workers of America in an effort to curry favor with the union and win its support for the company’s takeover of phone company Frontier Corp., according to a person familiar with the matter.

“Our contributions were not and are not contingent upon the receipt of any special action, favor or treatment by any government official,” Global Crossing spokeswoman Yeamans said.

But for the most part, the money wrung out of Global Crossing employees seemed to have no specific political, legislative or regulatory purpose. That was just fine with the politicians, who collected the funds and didn’t have to spend any political capital in return.

“All they’d have to say was, ‘We’re in favor of competition in telecommunications,’” said a former executive. “Global Crossing was not a monopolist. It was a new company with new technologies, and it didn’t come with any baggage.”

At least, not until recently.