Global Execs Recognize Workers’ Loss

A contrite Gary Winnick told Global Crossing Ltd. employees last week that the beleaguered telecommunications company had no viable alternative to filing the fifth-largest bankruptcy case in U.S. history in January, rendering worthless $453 million in stock held by employees and other investors.

“We recognize that many of you have been hurt by the collapse of our company’s stock,” Winnick, Global Crossing’s founder and co-chairman, wrote in a letter Thursday with Lodwrick Cook, the other co-chairman. “There are no words to explain how deeply we wish there had been a solution to our current situation that could have been different.

“But after consulting the best of legal, and financial minds, it was determined that filing Chapter 11 was the best way to preserve our wonderful company for a better day ahead.”

In a separate letter Friday to Global Crossing’s 8,000 employees, Chief Executive John Legere defended his multimillion-dollar compensation package and acknowledged rumors of an FBI investigation of the firm’s accounting methods. He added that the company is seeking additional investors to help lift it out of bankruptcy.

The letters, which employees said were posted on the company’s internal computer network, offer the first look at the executives’ spin on the events leading to Global Crossing’s filing for bankruptcy protection under the weight of $12.4 billion in debt. Winnick, Legere and other executives have been tight-lipped since the filing.

Global Crossing spokesman John Schmidt declined to comment on the letters.

“We view all communications between management and employees as confidential,” he said.

Winnick founded Global Crossing five years ago with a personal investment of $15 million. His dream was to build a worldwide undersea phone network, and he raised $20 billion to finance it. Over the years, he has cashed out $602 million, using $94 million to buy a mansion in Beverly Hills and pledging $100 million to charity. The company is based in Bermuda but has its executive offices in Beverly Hills.

In the letter, Winnick struck a sympathetic tone with employees, who not only lost their investments in Global Crossing stock but also saw the value of their retirement plans dwindle. He said the reorganization plan will allow the company to “provide its people with a means to rebuild their futures.”

Global Crossing’s Bankruptcy Court filing “was the first part of a necessary strategy to make sure our hard work is not in vain,” Winnick and Cook wrote. “We have full confidence that the proposed investment by Hutchison Whampoa and SingTech is the first step in a carefully planned strategy, designed to restore the financial stability of our company.”

Hutchison Whampoa Ltd. and Singapore Technologies Telemedia, two Asian telecommunications powerhouses, have agreed to provide Global Crossing with a $750-million investment in exchange for a majority stake of undefined size. The infusion is the key to the firm’s reorganization.

As for the FBI investigation, which has been reported in the media, Legere’s letter neither confirmed nor denied it. “I’ll not speculate on that further,” he wrote.

The company also is under investigation by the Securities and Exchange Commission. Legere wrote that he welcomed the chance to answer allegations of shady accounting practices made by Roy Olofson, a former vice president of finance who says he was unfairly dismissed by Global Crossing after he questioned the practices.

Legere wrote that the SEC will find that “there is nothing amiss with our accounting.”

The bulk of Legere’s letter addressed his compensation package, which has been criticized as exorbitant for a company whose finances turned out to be so precarious. Legere received a $15-million loan in February 2000 when he joined Asia Global Crossing, of which Global Crossing owns 59%. The loan was forgiven in October, after Legere became Global Crossing’s chief executive.

Legere wrote that the loan was meant to compensate him for giving up stock and options in Dell Computer Corp., where he was a high-ranking executive before he joined Asia Global Crossing. The $15-million payment was never designed to be repaid and was set up as a loan solely for tax reasons.

Legere wrote that the $1.1-million salary and $3.5-million signing bonus he received when he joined Global Crossing were considered reasonable by the company’s board of directors, who consulted with compensation experts and voted to approve the package.

“I was hired by Global Crossing to do a tough job--that is, take a company that was transitioning from a building phase to an operational phase all while facing enormous financial challenges in the company, the industry, and economy,” Legere wrote.