Posted on 12/30/2002 5:08:48 PM PST by GeneD
LOS ANGELES (Reuters) - Gary Winnick, the founder of bankrupt telecommunications company Global Crossing Ltd., said on Monday he would step down as chairman, 11 months after the company buckled under a mountain of debt.
Winnick, who has been under investigation for massive sales of the company's stock while the telecommunications industry was imploding, said his resignation as chairman would be effective on Tuesday. He added that he regretted the large financial losses incurred by others.
"I deeply regret that so many good people involved with Global Crossing also suffered significant financial loss," he said in a letter to the board. "Because of the decision to declare bankruptcy when we did, however, that vision of a truly complete and global communications network will be preserved."
Global Crossing, which was founded in 1997 and operates a fiber-optic network that connects 27 countries, filed for Chapter 11 bankruptcy protection in January in the wake of $12.4 billion in debt, a network capacity glut, stiff competition, and a weak global economy.
Winnick had been expected to step down as chairman when Global Crossing emerges from bankruptcy, which is expected in early 2003.
Winnick testified before Congress in October that he was unaware of the company's precarious position when he sold $123 million in stock in May 2001. He denied under oath he was "cashing out" with inside knowledge that the company was facing a $1 billion revenue shortfall and another $1 billion in expenses.
Winnick, who sold some $700 million in company stock over the past two years, also said on Monday he had fulfilled his pledge to give $25 million to cover employees who lost money in the company's 401(k) retirement plan.
Shareholders in Global Crossing lost billions of dollars as the company's stock price collapsed from a high of more than $64 in May 1999 to about 50 cents when it filed for bankruptcy. Global Crossing shares on Monday hit a new low, closing at just under 2 cents in over-the-counter trade.
In addition to the investigation into Winnick's stock sales, federal authorities have been examining whether Global Crossing engaged in last-minute swaps of network capacity with other companies to artificially inflate profits and hide worsening business conditions from investors.
The Los Angeles Times reported last week that federal prosecutors have decided against filing criminal charges against Global Crossing or its former executives for accounting fraud or destruction of documents.
The company still faces a probe by the Securities and Exchange Commission that could lead to civil charges, the paper said.
EMERGING FROM BANKRUPTCY
A federal bankruptcy court earlier this month approved Global Crossing's plan to emerge from bankruptcy protection. The company is now awaiting regulatory approval to sell a 61.5 percent stake in its network to two Asian investors, Hutchison Whampoa Ltd. and Singapore Technologies Telemedia Pte, for $250 million.
Since filing for bankruptcy protection, the company has shed more than 10,000 employees, slashed capital spending from a high of $3.2 billion to about $200 million for 2002 and reduced its debt load to about $200 million.
The company posted a $150 million net loss in October, on a consolidated basis. That was down slightly from the $157 million it lost in September but wider than the $138 million loss in August.
Winnick's spokesman, Terry Christensen, said the telecommunications executive would focus his energies at his investment firm, Pacific Capital Group, and look for investment opportunities.
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