Three former Global Crossing Ltd. officials, including former chairman Gary Winnick, have reached a tentative settlement with securities regulators over an alleged failure to disclose information about the telecommunications company's swap transactions, according to two sources briefed on the deal.
The sources spoke on the condition of anonymity because the settlement had yet to be approved by the five-member Securities and Exchange Commission, a step that is likely later this week.
If approved as expected, the settlement would put to rest a long-running probe of Global Crossing, a high-flying telecommunications giant before it filed for bankruptcy protection in January 2002 with $12.4 billion in debt. Although the executives are expected to pay financial penalties as part of the settlement, the company is not, the sources said.
Spokeswomen for the SEC and for Winnick declined to comment yesterday. Defense lawyers for two other former officials taking part in the settlement -- Joseph P. Perrone, the chief accounting officer, and Dan J. Cohrs, the chief financial officer -- did not return calls for comment. The amount of the civil penalties to be assessed against the three former executives could not be determined yesterday.
Last month, Winnick agreed to pay $30 million to settle a separate class-action lawsuit filed on behalf of shareholders and pension funds. A former law firm for the company agreed to pay an additional $19 million. Insurers of Global Crossing, which emerged from bankruptcy a year ago under new ownership, picked up the remaining $261 million included in that settlement.
Winnick also pledged $25 million more to start a fund to help compensate employees whose retirement savings vanished after the company filed for bankruptcy.
Winnick, a former investment banker, sold $734 million in company stock before Global Crossing collapsed. He resigned from the company in December 2002, shortly after the U.S. attorney's office in Los Angeles said it did not have enough evidence to bring criminal charges against him and his fellow executives.
Sources familiar with the tentative SEC settlement said that regulators are pursuing a theory that former officials failed to provide investors with adequate information about swap deals Global Crossing entered into with other telecommunications companies, where the companies exchanged nearly identical amounts of network capacity to help both sides boost revenue.
Becky Yeamans, a spokeswoman for Global Crossing, which is based in Bermuda but which also has a substantial New Jersey presence, declined comment yesterday.
Global Crossing shares closed at $16.70, up 70 cents, or more than 4 percent, after Bloomberg News reported the tentative settlement yesterday morning.