Gary Winnick and other former officers of Global Crossing agreed Friday to pay a combined $325 million to settle a class action lawsuit brought by two Ohio pension funds and others who invested in the notorious telecommunications company, according to lawyers for the plaintiffs.
Winnick, the founder and former chairman who sold $123 million worth of Global Crossing stock as the company spiraled toward one of the biggest bankruptcy filings in U.S. history, will pay $55 million of the settlement, according to the law firm Grant & Eisenhofer PLC.
The settlement also includes a $19.5 million payment from Global Crossing's law firm, Simpson, Thacher and Bartlett LLP, which was not a defendant in the case, but which had been accused of conflicts of interest and neglect in investigating allegations of fraudulent accounting.
The plaintiffs, led by the Public Employees Retirement System of Ohio and the State Teachers' Retirement System of Ohio, had accused Winnick and other Global Crossing officers of defrauding them by distorting the company's financial reports with questionable dealings and deceptive comments.
Another $195 million of the settlement will be paid by insurance companies on behalf of the other directors who were insured against liability by the company, Grant & Eisenhofer said.
The agreement did not settle claims against other defendents in the case, including former Global Crossing auditor Arthur Andersen and Wall Street underwriters who helped sell the company's securities.
Global Crossing emerged from bankruptcy protection in December, erasing all but $200 million of the $11 billion the company owed when it filed for Chapter 11 in January 2002. At that point, it was the largest telecom bankruptcy in U.S. history, but that mark would be dwarfed just six months later with the $41 billion bankruptcy filing by WorldCom.
Global Crossing spent billions during the telecom and Internet boom building a 100,000-mile network of undersea cables and fiber-optic lines, but demand failed to materialize as quickly as the company had hoped.