Another Name at Global Stands Out
As federal investigators intensify their scrutiny of Global Crossing Ltd. and its chairman, Gary Winnick, one name keeps popping up: Thomas J. Casey, a former chief executive and onetime Winnick intimate who is too ill to speak for himself.
Casey, who is undergoing treatment for colon cancer, ran Global Crossing out of its Beverly Hills offices for most of 2001, a year during which executives and employees were scrambling to bolster faltering sales, preserve cash and stave off a showdown with the company’s banks.
It’s also the year that most interests investigators from the Justice Department and the Securities and Exchange Commission, who are probing whether Global Crossing used misleading accounting to mask crumbling finances. They want to know, as well, whether Winnick and other Global Crossing executives were aware of the company’s problems when they sold more than $100 million of stock in 2001.
Under questioning about those issues by a congressional panel this month, the usually hands-on Winnick distanced himself from day-to-day operations of the company and instead invoked Casey’s name more than 50 times -- or about once every eight minutes. None of the other four chief executives who have run Global Crossing since its founding in 1997 was mentioned even close to the same number of times.
A sampling of Winnick’s responses: “Tom Casey, who was the CEO at this time.” And “I think it’s important to recognize that Tom was the CEO of the company during this period of time.” And “Tom reported to me as chairman. He ran the business. He was the CEO.” And later: “I had to rely on Tom Casey.”
A person who has worked with both men and listened to the hearing said he felt as though “Tom Casey was becoming Gary’s personal scapegoat.”
But it may not be that simple.
Casey’s name also appears in a series of e-mails that discuss the need to land big network capacity swaps with other telecommunications companies to meet financial targets. The legitimacy of some of those deals has been called into question.
Other e-mails where Casey was either mentioned or sent a copy express varying degrees of concern about Global Crossing’s cash position and its ability to meet performance requirements set by the company’s banks.
And it was Casey who reiterated the company’s financial guidance to Wall Street analysts just weeks before Global Crossing reversed course. The company filed for bankruptcy protection in January, four months after Casey left.
As CEO, Casey was ultimately responsible for whatever happened inside Global Crossing. But former Global Crossing employees who know Casey and Winnick said it’s unlikely that he acted without the knowledge and consent of his chairman, a friend who once gave him an Aston Martin convertible.
“If you heard it from Tom, you were hearing it from Gary,” said one former employee.
Even outsiders knew of Winnick’s control within Global Crossing. “It’s probably naive to think [Winnick] wasn’t deeply involved,” said analyst Patrick Comack of Guzman & Co. “It seemed like he was very hands-on ... and he was firing these CEOs left and right.”
Citing the government’s investigations, Global Crossing declined to discuss -- or make current executives available to discuss -- the details of Winnick’s congressional testimony, the issues behind it or Casey’s tenure at the company.
However, Winnick’s longtime attorney Terry Christensen stressed that his client wasn’t trying to blame Casey for anything. In fact, Christensen said, “Gary’s belief is that Tom did everything right.... These fellows are not dumping on each other because they don’t think they did anything wrong.”
‘A Different Job’
At the same time, Christensen said, Winnick wanted to make sure that lawmakers understood “that as chairman of the company, he had a different job than the CEO.”
“If he had said repeatedly, ‘It’s not my job’ or ‘That’s not my job’ ” without mentioning specifically who held the CEO post, “that would have sounded terrible,” Christensen added. “He was just trying to make a distinction between what Tom was doing and what he was doing.”
Casey’s version of events has not been -- and may never be -- publicly aired.
He has been interviewed by investigators from the SEC and from the House Energy and Commerce Committee’s Oversight and Investigations panel.
Casey had planned to testify with Winnick and other former and current Global Crossing executives at the committee’s Oct. 1 hearing. But several weeks ago, the 50-year-old was diagnosed with cancer and underwent surgery, making him too sick to travel to Washington. His attorney, Patrick Sharkey, declined an interview request.
At the hearing, Winnick and Chief Financial Officer Dan Cohrs said Casey’s alarm over looming budget shortfalls, which is evident in some e-mails, does not point to a motive for any inappropriate activity, but merely reflects the financial stresses that are common within a young company like Global Crossing.
But if investigators reject those explanations, the e-mails could be viewed as evidence that the company had a reason to fudge its books, and that Casey and other top executives were aware the company was in trouble in the first half of 2001, while Winnick and others were selling shares. (Casey himself didn’t unload any of his Global Crossing stock during this period.)
Casey Forced Out
Global Crossing didn’t mention its woes publicly until Aug. 1, when the company revealed worse-than-expected financial results, lowered year-end revenue targets and announced layoffs and office closures. Two months later, Casey was forced out and replaced by current Chief Executive John Legere, who was then running sister company Asia Global Crossing.
Soon after Global Crossing was formed, Winnick met Casey, who was then a Merrill Lynch investment banker. In 1998, Winnick hired Casey as Global Crossing’s managing director and vice chairman -- and to double as president and board member of Pacific Capital Group, Winnick’s investment firm.
His role at both companies was to pursue potential deals and other investment opportunities, and for a time, the two companies shared the cost of his compensation. Casey and Winnick, who once worked alongside junk-bond king Michael Milken at Drexel Burnham Lambert, shared a love of the deal. In his corporate development role, Casey had a hand in many of Global Crossing’s acquisitions, including Racal Telecom, Cable & Wireless’ Global Marine unit and Frontier Corp.
Winnick trusted Casey. The two executives were friendly enough to dine together with their wives, and at one point, they even took a Mediterranean vacation together as a foursome, according to former employees who asked not to be identified.
Casey, a silver-haired man with bright blue eyes, was often smiling. Despite being born in Frankfurt, Germany, and raised in Boston and Washington, D.C., he liked to play up his Irish heritage, the former employees said.
He was well-liked within the company because he treated other workers with courtesy and respect, these people said.
Still, people who know Casey say he lacked experience in running a company and was not an obvious choice for the chief executive’s job in late 2000, when Winnick named him to replace departing CEO Leo Hindery.
Lawyer and Deal-Maker
Casey spent most of his career as a lawyer and deal-maker. After earning a law degree from George Washington University, he served as a trial attorney and utilities specialist in the antitrust division of the Justice Department, then moved to the Federal Communications Commission, where he rose to become deputy chief of operations in the common carrier bureau, the division that regulates telecommunications firms.
When he left government work in 1981, he joined a team of Washington lawyers representing telecommunications and media companies with issues before the FCC. Four years later, Casey moved on to mergers and acquisitions, spending three years at Merrill Lynch, where he became co-head of the firm’s global communications group and helped direct Merrill’s worldwide investment banking activity in telecommunications.
His Merrill affiliation led him to Winnick and Global Crossing. And, like many of Global Crossing’s executives, Casey was well-paid for making the switch.
When he became CEO, Global Crossing awarded him a $1.1-million salary and gave him an $8-million loan that was later forgiven. In 2000, he received a $1-million bonus, plus stock options for 3 million Global Crossing shares. At the end of 2000, Casey’s unexercised shares that were “in the money” were valued at $16.5 million, though none of those shares were cashed in before the stock tanked, according to Thomson Financial.
Critics have long faulted Global Crossing for awarding highly lucrative compensation packages to its executives. But other payments to Casey also may raise questions among the company’s creditors.
In 2001, the company and its subsidiaries paid Casey nearly $400,000 in expense reimbursements, including several payments that were atypical because they were for even amounts -- including one for $60,000 on the nose and six for exactly $20,000 each, according to company filings in Bankruptcy Court.
“You can’t tell whether it’s suspicious, curious or mundane” just from the filings, said bankruptcy attorney William J. Rochelle. “But round numbers like that raise anybody’s eyebrows.”
Global Crossing also forgave $336,828 in interest on the $8-million loan and paid Casey $328,183 to cover taxes on the loan, which essentially was additional compensation.
Not counting stock options, Casey’s 2001 compensation totaled more than $13 million in cash and loans that didn’t have to be repaid. Some $3.5 million of that represented his severance.
Casey’s tenure at Global Crossing ended abruptly, and not voluntarily, at the end of the third quarter of 2001, when he was replaced by Legere.
Christensen, Winnick’s lawyer, said the two men “still feel very warmly toward each other.” But insiders say the parting was not so friendly. “When Gary treated Tom badly, I think people were unhappy,” said one former manager. “If anyone gave [Winnick] his soul, it was Tom.”
