When he founded Global Crossings in 1998, Gary Winnick promised that Global’s fiber-optic cables would help start a telecommunications revolution, allowing data to zip around the planet in the blink of an eye. “He kept saying how Global Crossing was going to change the world,” recalled Richard Klugman, a telecom analyst who witnessed the performance that night and who, along with many others, bought the story.
In October 2002, almost four years to the day after that dinner, Mr. Winnick sat before a Congressional investigative committee, trying to explain why Global imploded and how he managed to salvage at least $735 million out of the wreckage for himself.
“Yes, I made a lot of money,” Mr. Winnick told members of Congress. “But when I went into this venture, building a cable across the Atlantic, I had no contemplation that this thing would turn out to be what it was. I’m both proud and saddened by it.”
Along with Kenneth L. Lay of Enron, L. Dennis Kozlowski of Tyco International and Bernard J. Ebbers of WorldCom, Mr. Winnick has emerged as a symbol of the financial shenanigans behind the 1990’s bull market. Unlike the others, however, Mr. Winnick, Global’s founder and chairman, has already been cleared of criminal charges. The Justice Department quietly dropped a criminal fraud investigation of him on Christmas Eve of 2002, relieving him of the prospect of prison time. But he still faces two civil suits – others have been settled – and a continuing Securities and Exchange Commission investigation.
Of all the lawsuits, one filed against Mr. Winnick last October in federal court in Manhattan holds special significance. J. P. Morgan Chase and other leading banks are seeking $1.7 billion in damages from Mr. Winnick and other Global Crossing executives, contending that the group engaged in a “massive scam” to “artificially inflate” the company’s performance to secure desperately needed loans. Mr. Winnick, whose lawyers dispute the accusations, declined to be interviewed for this article.
Among other things, the suit refocuses attention on exactly what Mr. Winnick knew about his company’s finances during times when it was borrowing heavily and he was selling hundreds of millions of dollars in stock. It also outlines a troubling series of meetings he held with Mr. Lay and other Enron executives just months before their company crumpled.
In late June, the judge in the case, Gerard E. Lynch, ruled that the banks’ accusations had enough merit for the case to move forward, meaning that Mr. Winnick might find himself on the witness stand again.
“I am prepared to look at this case as, with all respect to the people involved, a bunch of crooks getting sued by a bunch of bankers who are too dumb to stop throwing money down the toilet,” Judge Lynch said in an earlier court hearing, before adding that there was credibility to the notion that Global may have defrauded the banks.
But the full account of Global’s rise and fall is more shaded than Judge Lynch’s comments suggest, and speaks not only to Mr. Winnick’s tenure there but also to the business milieu that shaped him as a financier.