The Securities and Exchange Commission has rejected a staff recommendation to bring civil charges against former Global Crossing Ltd. chairman Gary Winnick, his lawyer said yesterday.
The SEC vote, which took place last week but has not been publicly announced, is an unusual setback for enforcement division staffers, who had reached a tentative deal with Winnick. Winnick had agreed to pay $1 million to settle charges that he failed to fully disclose the terms of several deals to swap fiber-optic network capacity. The SEC's five commissioners have the ultimate authority to approve or reject such settlements.
Commissioners found too little evidence to link Gary Winnick to wrongdoing.
(Dennis Cook -- AP)
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Winnick's lawyer, Gary P. Naftalis, said his client was "gratified" by the agency's decision. "We always believed that the evidence demonstrated that Gary Winnick acted lawfully and properly in connection with Global Crossing," Naftalis said in a prepared statement.
Winnick, a former investment banker who made $734 million through sales of the telecommunications company's stock, donated millions of dollars to political parties in flush years. But after its debt mounted to $12.4 billion, Global Crossing filed for bankruptcy protection in 2002 and emerged last year under new ownership.
The company, which continues to struggle financially, will settle related disclosure charges with the SEC without paying a fine. Such moves are increasingly common, as agency officials say they do not want to imperil a company's ability to survive by imposing stiff financial penalties.
Becky Yeamans, a spokeswoman for the company, which is based in Bermuda but has a sizable New Jersey presence, declined to comment yesterday on the results of the SEC vote, which was reported in yesterday's editions of the Wall Street Journal.
Lawyers for two other former officials who had tentatively agreed to settle SEC charges did not return calls. It is not clear whether former finance chief Dan J. Cohrs and former accounting chief Joseph P. Perrone, who had been cited by independent investigators for entering into contracts with his son's company, would abide by the settlement terms or would seek to renegotiate.
Former SEC lawyers said the facts of the Global Crossing case mean that the decision not to charge may not be precedent-setting. Winnick, for instance, did not hold the title of chief executive at the time Global Crossing entered into deals in which it exchanged nearly identical amounts of network capacity with rivals. The deals allowed both sides to book much-needed revenue.
"The temptation is to generalize about this," said David M. Becker, a former SEC general counsel not involved in the Global Crossing case. "I think it would be a mistake. These are very specific facts. It's newsworthy because it's unusual, but I don't think it's the start of a trend."
The decision not to charge Winnick apparently was sealed when SEC Chairman William H. Donaldson cast his vote along with fellow Republican commissioners Paul S. Atkins and Cynthia A. Glassman. They reasoned that the agency did not have enough evidence tying Winnick to the faulty disclosures, according to sources who declined to be identified because the process is confidential.
SEC spokesman Matthew Well declined to comment on Donaldson's decision-making process. He said he was not authorized to speak about closed deliberations at the agency.
