Global Crossing Founder to Be Fined, Sources Say
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Global Crossing Ltd. founder Gary Winnick and at least two other executives are likely to be fined under an agreement that will end a federal probe into the company’s accounting, people familiar with the matter said Monday.
The Securities and Exchange Commission plans to vote Thursday on the proposed settlement, which would allow the Hamilton, Bermuda-based company to avoid a penalty, said the people, who asked not to be named. They declined to say how much the executives would pay.
An agreement would end a three-year probe into whether Global Crossing overstated revenue by swapping fiber optic network capacity with phone carriers including Qwest Communications International Inc. Global Crossing won’t be accused of fraud, unlike Qwest, which is paying $250 million after overstating sales by $3.8 billion. Global Crossing will be accused of inadequate disclosure, which is the basis for the executives’ fines, the sources said.
Global Crossing spokeswoman Becky Yeamans declined to comment, as did Winnick spokeswoman Marcia Horowitz and the SEC’s John Heine.
Joe Perrone, Global Crossing’s former chief accounting officer, and Dan Cohrs, who was chief financial officer, will be fined with Winnick, the sources said. Joseph Goldstein, a lawyer representing Cohrs, and Clyde Szuch, Perrone’s attorney, didn’t return calls seeking comment.
A former executive with Michael Milken at Drexel Burnham Lambert, Winnick founded Global Crossing in 1997 and ran it from Beverly Hills. The company amassed $12 billion of liabilities building a 100,000-mile fiber optic network. It filed for Chapter 11 protection in January 2002 after demand for the network from corporate users fell short of expectations. About $40 billion in stock market value was lost.
Winnick, 57, sold shares worth $578 million before Global Crossing filed for bankruptcy. He stepped down as the company’s chairman in December 2002.
Shares of Global Crossing, now run from Florham Park, N.J., rose 70 cents to $16.70 on Nasdaq.
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