Global Crossing
Encyclopedia
Global Crossing Limited was a telecommunication
s company that provides computer network
ing services worldwide. It maintained a large backbone
and offered transit and peering links
, VPN, leased lines, audio and video conferencing, long distance telephone, managed services
, dialup, colocation
and VoIP, to customers ranging from individuals to large enterprises and to other carriers. The main emphases was on higher margin layered services like managed services and VoIP with leased lines. Global Crossing is a tier 1 carrier. On October 3, 2011, the company was purchased by Level 3 Communications
.
Its core network delivers services to more than 700 cities in more than 70 countries and six continents around the globe.
Global Crossing was the first global communications provider with IPv6 natively deployed in both its private and public backbone networks. The company led the way in IP services with the first global deployment of MPLS
-te and the first global MPLS-based IP VPN. In addition, Global Crossing also offered the first global multicast IP VPN service option, and the first converged IP solution (VoIP, IP Video, VPN, DIA).
The company is legally domiciled in Bermuda
, although its administrative headquarters are in New Jersey
.
and three business associates (Abbott L. Brown, David L. Lee
, and Barry Porter) in 1997 through Pacific Capital Group, Winnick's personal venture group, which had experienced mixed results in its twelve-year history. In 1997, Global Crossing raised $35 million of capital from the CIBC Argosy Merchant Funds (later Trimaran Capital Partners
). The heads of the CIBC Argosy Merchant funds were former associates of Winnick from his days in the 1980s as a salesman at Drexel Burnham Lambert
under Michael Milken
. CIBC would ultimately realize a gain estimated to be $2 billion from its relatively small equity investment in Global Crossing, making it one of the most profitable investments by a financial institution in the 1990s.
From 1997 until 2002, Winnick held the title of chairman; Lodwrick Cook
, former CEO of Atlantic Richfield Company (ARCO), was hired by Winnick in 1998 as co-chairman. John Scanlon
became Global Crossing's first chief executive officer the same year. In what would become a trend with Global Crossing's chief executives, Scanlon's leadership was short-lived, and in February 1999, he was replaced by Robert Annunziata, who had resigned his position as president of AT&T
's business services group to "build a company from start to finish." Annunziata oversaw the rapid expansion of the company, including the purchase of Frontier Corp. at a cost of $11.2 billion and the $850 million purchase of Global Marine Systems
. After only a year though, in March, 2000, Annunziata resigned. During his time as CEO, Global Crossing had gone from a medium-sized company of about 150 employees to an international giant with over 14,000 employees.
Taking over as CEO, Leo Hindery, another AT&T
executive, had joined the company a few months earlier as head of its webhosting division, GlobalCenter. Hindery took the helm at a critical turning point for the company. In March, the month Hindery assumed command, Global Crossing's stock had reached a high of $61 per share. A month later, however, the stock price had fallen to just $25 a share. The company's filing for an offering of $2.5 billion in common and convertible preferred shares was cut in half. Many of the original investors bailed out at that time as well, cashing out most or all of their holdings for astounding gains. Gary Winnick, who continued with his company, himself made another $260 million at the April, 2000 stock offering. CEO Hindery projected the company would be cash-flow positive by early 2002, but two months later, in October, 2000, he quit, submitting his resignation after just seven months with the company. This took place after the sale of the GlobalCenter division to Exodus Communications, in a deal in which Hindery made $251 million.
Hinderey was replaced by Thomas Casey, a forty-eight year old lawyer who came to Global Crossing from Merrill Lynch
, where he was co-head of the global telecom investment banking group. Prior to that time, Casey had worked as an attorney for the Federal Communications Commission
and the Department of Justice
. Reports by individuals close to the company to the media suggested conflicts and power-struggles between Mr. Winnick and CEOs Annunziata and Hindery.
in 2001, which renamed itself Frontier Communications in 2008.
In 2011, Level 3 Communications
announced its intent to purchase Global Crossing. This transaction is expected to be completed by the end of 2011. On July 27, 2011, the two companies announced their financial data for the second quarter of 2011, and almost all business sectors have a slight increase.
racing sponsorship and the rescue attempt of a Russian submarine, but its business triumphs were lacking. By early 2001, emerging telecommunications carriers and online businesses - two groups Global Crossing had been relying on to build traffic on its network - were fading fast. Walt Disney
withdrew from its money-losing site Go.com
and eToys
announced it was running out of cash. Additionally, the parade of telecom companies filing bankruptcy began that year, including Global Crossing customers Northpoint Communications Group
and GST Telecommunications. Nevertheless, CEO Casey projected continued financial growth with targets at thirty percent in 2001, the year the company's vice president of finance, Roy Olofson, claimed later he had voiced concerns about alleged "last-minute swap transactions" with customers from whom Global Crossing also purchased services. The deals noted by Olofson included a $100 million exchange of capacity with Qwest
and a $200 million sale to 360Networks, from whom Global Crossing purchased $150 million of capacity. Global Crossing claimed Olofson's allegations were false, and that he had threatened to file a lawsuit against the company if he was not paid a substantial amount of money. The company stated that its financial and reporting items had been reviewed both internally and by the company's auditor, Arthur Andersen
.
In June, 2001, Global Crossing completed its core network, spanning four continents, 27 countries and 200 major cities. The same month, it completed the sale of its local telephone-company business on June 29. Casey's confidence in the company's strength seemingly maintained that of many investment bankers and investors. Third-quarter filings for 2001, however, were considered disappointing, and Global Crossing announced plans to dispose of Global Marine. It was announced that Asia Global Crossing, of which Global Crossing owned fifty-nine percent, had entered discussions to merge in October 2001, after John Legere, Asia's CEO, became head of both companies. The merger discussions ended in November 2001 and Legere was replaced as Asia Global Crossing CEO in January 2002 and was removed from the Asia Global Crossing board in April 2002.
By this time, the finance world was losing confidence rapidly, and Global Crossing's stock price continued to fall, hitting five dollars a share by November, 2001. On December 20, it was revealed that Asia Global Crossing had requested $400 million from a credit line granted at its spinoff in 2000 by Global Crossing. Global Crossing refused to fund the line and a month later, in January, 2002, the company filed for Chapter 11 bankruptcy protection and its assets were ultimately sold to Asia Netcom, a subsidiary of China Netcom. At the same time, a letter of intent was filed by Global Crossing to sell control of the company, seventy-nine percent, to a joint venture between Hong Kong-based Hutchison Whampoa
and Singapore Technologies Telemedia. Global Crossing's bankruptcy filing listed total assets of $22.4 billion and debts amounting to $12.4 billion. If ranked by assets, Global Crossing's bankruptcy is the seventh largest filing in American history.
On January 28, 2002, Global Crossing announced that it signed a letter of intent with Hutchison Whampoa Limited and Singapore Technologies Telemedia Pte. Ltd. (ST Telemedia) for a cash investment for a joint majority stake in the company's equity in connection with a restructuring of the company's balance sheet.
In April 2003, ST Telemedia announced it would assume the rights and obligations of Hutchison to invest in Global Crossing, increasing its original investment of 61.5 percent ownership interest in the reorganized Global Crossing.
In October 2006, Global Crossing announced the acquisition of UK-based Fibernet, followed two weeks later with the announcement of its intention to also acquire Impsat, a leading provider of telecom and Internet services in Latin America.
Fibernet's roster of enterprise and carrier customers in the financial, insurance and retail segments complements Global Crossing's market position in the UK government and rail sectors. The acquisition of Impsat brings Global Crossing a local presence in seven Latin American countries, Impsat’s 10,000 kilometer, extensive IP-based inter-regional network, 15 metropolitan networks and 15 advanced hosting centers, which provide additional services to Global Crossing’s Latin American operations.
inside sales for the same period.
Pacific Capital Group, Winnick's investment company, was the owner of Global Crossing's palatial office space in Beverly Hills, California
. PCG had paid $41.5 million for the office space in 1998 and spent an additional $9 million on renovations. Global Crossing, its newest "tenant" paid rent to PCG of $400,000 a month. Winnick's personal office, called the "Oval Office," contained furniture priced at over $1 million, and hanging outside the entrance to the office was a painting by Pablo Picasso
, purchased for $15 million. The Beverly Hills office was not the only extravagant office space - Global Crossing's office in New York City, located at 80 Pine Street (currently no longer in use), underwent an extensive renovation. David Walsh, founder of IXNet (which Global Crossing purchased in February, 2000 for $3.4 billion), headed the Manhattan office and was acting Chief Operating Officer. Walsh oversaw the installation of a custom-made lighting system to emulate fiber optic strands with neon lighting. A staircase linking the 29th and 30th floors, installed but then changed at a cost of $250,000, was acknowledged openly by Walsh.
Additionally, Global Crossing operated five corporate jets, including a Boeing 737
, a Challenger, a Gulfstream
, an Astra
and a seven-seater, when, according to one former executive, it needed two jets maximum. Employees reported reckless spending in other areas as well, including the purchase of new accounting software costing $150 million when accounting department staff indicated the current software did not need updating. It was later discovered the software was never even installed.
Gary Winnick's spending was criticized and he was condemned by many employees, many of whom had losses beyond their jobs when the company filed bankruptcy. Even as the company's financial situation went from questionable to grim, work continued on Winnick's Bel Air mansion, valued at $92 million and considered the most expensive home purchased in Los Angeles
(and by some reports, American) history. Winnick purchased the 30000 square feet (2,787.1 m²) mansion on 9 acres (36,421.7 m²), known as Casa Encantada, in September 2000 from David Murdock. Winnick paid $66 million of the purchase price in cash. After the acquisition, much of the house was renovated, new mechanical and electrical systems were completely updated and a service wing was converted into a studio for his wife Karen Winnick. The estate includes tennis courts, a swimming pool, pool house, and priceless views of Los Angeles. Prior to Murdock, the original house had been owned by Conrad Hilton
, founder of Hilton Hotels
. Winnick stated publicly and accurately that the 64-year old estate was being "updated and freshened."
With his wife Karen, a children's book author and co-founder of the Gary & Karen Winnick Foundation, Gary Winnick gave extensively to charity. To the Simon Wiesenthal Center
, a Jewish center in Los Angeles committed to fighting prejudice and hate crimes, Winnick pledged $40 million for the construction of a branch to be located in Jerusalem that will be called the Winnick Center for Tolerance. Another Jewish center, the Skirball Center, received a $5 million donation, and the Winnick Foundation pledged $3 million to a Chabad girls' school in West Los Angeles. A total of $100 million was given to other charities, including the Los Angeles Zoo
and the Los Angeles Public Library
.
Hutchison Whampoa
withdrew from its planned purchase of Global Crossing after the Committee on Foreign Investment in the United States made it clear that the purchase would not be approved with Hutchison as a purchaser. Singapore Technologies Telemedia acted alone and purchased Global Crossing for $750 million, buying it out of bankruptcy and terminating Gary Winnick's control of the company. Investigations were conducted by the SEC
and resulted in former CEO Thomas Casey, former chief financial officer Dan Cohrs, and former president of finance, Joseph Perrone receiving fines of $100,000 each. The SEC closed its investigation of Gary Winnick, who received no punitive action or fines.
In 2004, Global Crossing settled a class action lawsuit over the losses the employees incurred from their pensions and 401Ks. Investors and former employees, represented by Grant & Eisenhofer P.A.
, received $325 million in the settlement. Gary Winnick, the founder and former chairman of Global Crossing contributed $30 million to the settlement. Simpson Thacher & Bartlett
, Global Crossing's law firm, paid $19.5 million, even though the firm was not named as a defendant. The $30 million from Mr. Winnick is in addition to a $25 million fund he set up in December 2002 for Global Crossing employees who lost money investing in the retirement plan. Under the terms of the settlement, investors who bought Global Crossing securities beginning in 1999 received $245 million and former employees received $80 million. This amount was only a fraction of the losses the former employees incurred on their retirement plans. Mr. Winnick made $734 million selling his shares in Global Crossing before it collapsed. Some defendants named in the lawsuit did not participate in the settlement and will continue to litigate the case. Among them are Arthur Andersen, Global Crossing's auditor; Salomon Smith Barney, J.P. Morgan, Goldman Sachs and other investment banks that sold Global Crossing securities; and Jack B. Grubman, the former Salomon Smith Barney telecommunications analyst. They have maintained that they did nothing wrong in their work related to Global Crossing.
chairman Terry McAuliffe
turn a $100,000 stock investment into $18,000,000. Winnick later gave a million dollars to President Bill Clinton
's presidential library.
In 1998, former U.S. president George H. W. Bush
gave a speech in Tokyo on behalf of Global Crossing, for which he was compensated with $50,000 of Global Crossing stock which he sold in 1999 and 2000 for more than $4.5 million.
Global Crossing's political contributions tended to be fairly evenly distributed between Republican and Democratic parties, with co-chairman Winnick tending to favor Democrats and co-chairman Cook favoring Republicans. In 2000, the company gave $250,000 each to the Republican and Democratic Conventions. In 1999, the company hired former assistant attorney general Anne Bingaman, married to Democratic New Mexico Senator Jeff Bingaman
, as a Washington lobbyist, paying her $2.5 million between January and June 1999 to try to block licensing of an AT&T, MCI, and Sprint consortium cable from the U.S. to Japan. The large bicameral donations have been suggested to be a reason why investigations against the company's upper management did not result in any criminal charges, despite the size of the bankruptcy and the large amount of circumstantial evidence that some sort of malfeasance had occurred.
It has remained a major name in the business, and it also became a corporate partner of various governmental and academic networks, such as the UK
's Immigration and Nationality Directorate, the U.S. government, European academic networks GEANT
, SURFnet
and others, the US Internet2
and the Canadian CA*Net.
In late 2006, Global Crossing announced acquisitions of Fibernet, a provider of private network services in the UK, and Impsat, an Internet provider in South America.
Since emerging from bankruptcy, the company has attempted to re-focus its business around enterprise customers and de-emphasise its historic wholesale business, with some limited success. A new strategy, articulated in October 2004, has enabled it to turn around its performance in its core business while improving margins. It secured additional funding from its parent STT
in December 2004 and anticipates becoming cash flow positive by the end of 2006.
Telecommunication
Telecommunication is the transmission of information over significant distances to communicate. In earlier times, telecommunications involved the use of visual signals, such as beacons, smoke signals, semaphore telegraphs, signal flags, and optical heliographs, or audio messages via coded...
s company that provides computer network
Computer network
A computer network, often simply referred to as a network, is a collection of hardware components and computers interconnected by communication channels that allow sharing of resources and information....
ing services worldwide. It maintained a large backbone
Backbone network
A backbone network or network backbone is a part of computer network infrastructure that interconnects various pieces of network, providing a path for the exchange of information between different LANs or subnetworks. A backbone can tie together diverse networks in the same building, in different...
and offered transit and peering links
Peering
In computer networking, peering is a voluntary interconnection of administratively separate Internet networks for the purpose of exchanging traffic between the customers of each network. The pure definition of peering is settlement-free or "sender keeps all," meaning that neither party pays the...
, VPN, leased lines, audio and video conferencing, long distance telephone, managed services
Managed services
Managed services is the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations inclusive of Production Support and lifecycle build/maintenance activities...
, dialup, colocation
Colocation centre
A colocation centre or colocation center , is a type of data centre where equipment space and bandwidth are available for rental to retail customers...
and VoIP, to customers ranging from individuals to large enterprises and to other carriers. The main emphases was on higher margin layered services like managed services and VoIP with leased lines. Global Crossing is a tier 1 carrier. On October 3, 2011, the company was purchased by Level 3 Communications
Level 3 Communications
Level 3 Communications is a telecommunications and Internet service provider headquartered in Broomfield, Colorado.It operates a Tier 1 network. The company provides core transport, IP, voice, video and content delivery for most of the medium to large Internet carriers in North America and Europe...
.
Its core network delivers services to more than 700 cities in more than 70 countries and six continents around the globe.
Global Crossing was the first global communications provider with IPv6 natively deployed in both its private and public backbone networks. The company led the way in IP services with the first global deployment of MPLS
Multiprotocol Label Switching
Multiprotocol Label Switching is a mechanism in high-performance telecommunications networks that directs data from one network node to the next based on short path labels rather than long network addresses, avoiding complex lookups in a routing table. The labels identify virtual links between...
-te and the first global MPLS-based IP VPN. In addition, Global Crossing also offered the first global multicast IP VPN service option, and the first converged IP solution (VoIP, IP Video, VPN, DIA).
The company is legally domiciled in Bermuda
Bermuda
Bermuda is a British overseas territory in the North Atlantic Ocean. Located off the east coast of the United States, its nearest landmass is Cape Hatteras, North Carolina, about to the west-northwest. It is about south of Halifax, Nova Scotia, Canada, and northeast of Miami, Florida...
, although its administrative headquarters are in New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
.
Founding and early growth
Global Crossing was founded by Gary WinnickGary Winnick
Gary Winnick is an American financier with a global investment career spanning three decades. He is Chairman and Chief Executive Officer of Pacific Capital Group, a diversified private investment firm founded in 1985...
and three business associates (Abbott L. Brown, David L. Lee
David L. Lee
David Li Lee is a Taiwanese-American business executive and venture capitalist, best known as a co-founder of Global Crossing Ltd.Lee is a graduate of McGill University. He received a Ph.D. in theoretical physics from Caltech in 1974, with a minor in economics...
, and Barry Porter) in 1997 through Pacific Capital Group, Winnick's personal venture group, which had experienced mixed results in its twelve-year history. In 1997, Global Crossing raised $35 million of capital from the CIBC Argosy Merchant Funds (later Trimaran Capital Partners
Trimaran Capital Partners
Trimaran Capital Partners is a middle-market private equity firm formerly affiliated with CIBC World Markets. Trimaran is headquartered in New York City and founded by former investment bankers from Drexel Burnham Lambert. Trimaran’s predecessors were early investors in telecom and Internet...
). The heads of the CIBC Argosy Merchant funds were former associates of Winnick from his days in the 1980s as a salesman at Drexel Burnham Lambert
Drexel Burnham Lambert
Drexel Burnham Lambert was a major Wall Street investment banking firm, which first rose to prominence and then was forced into bankruptcy in February 1990 by its involvement in illegal activities in the junk bond market, driven by Drexel employee Michael Milken. At its height, it was the...
under Michael Milken
Michael Milken
Michael Robert Milken is an American business magnate, financier, and philanthropist noted for his role in the development of the market for high-yield bonds during the 1970s and 1980s, for his 1990 guilty plea to felony charges for violating US securities laws, and for his funding of medical...
. CIBC would ultimately realize a gain estimated to be $2 billion from its relatively small equity investment in Global Crossing, making it one of the most profitable investments by a financial institution in the 1990s.
From 1997 until 2002, Winnick held the title of chairman; Lodwrick Cook
Lodwrick Cook
Lodwrick Monroe Cook is an American businessman.-Background and education:He received a bachelor's degree in mathematics from Louisiana State University in 1950 and was also a member of the Sigma Chi Gamma Iota Chapter there...
, former CEO of Atlantic Richfield Company (ARCO), was hired by Winnick in 1998 as co-chairman. John Scanlon
John Scanlon
Lieutenant Colonel John Joseph Scanlan, DSO and bar was an Australian Army officer during the First World War and the Second World War. He led Lark Force at Rabaul and was taken as a prisoner of war.-Notes:...
became Global Crossing's first chief executive officer the same year. In what would become a trend with Global Crossing's chief executives, Scanlon's leadership was short-lived, and in February 1999, he was replaced by Robert Annunziata, who had resigned his position as president of AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
's business services group to "build a company from start to finish." Annunziata oversaw the rapid expansion of the company, including the purchase of Frontier Corp. at a cost of $11.2 billion and the $850 million purchase of Global Marine Systems
Global Marine Systems
Global Marine Systems is a specialist-shipping company that installs, maintains and repairs submarine communications and power cables.- History :...
. After only a year though, in March, 2000, Annunziata resigned. During his time as CEO, Global Crossing had gone from a medium-sized company of about 150 employees to an international giant with over 14,000 employees.
Taking over as CEO, Leo Hindery, another AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
executive, had joined the company a few months earlier as head of its webhosting division, GlobalCenter. Hindery took the helm at a critical turning point for the company. In March, the month Hindery assumed command, Global Crossing's stock had reached a high of $61 per share. A month later, however, the stock price had fallen to just $25 a share. The company's filing for an offering of $2.5 billion in common and convertible preferred shares was cut in half. Many of the original investors bailed out at that time as well, cashing out most or all of their holdings for astounding gains. Gary Winnick, who continued with his company, himself made another $260 million at the April, 2000 stock offering. CEO Hindery projected the company would be cash-flow positive by early 2002, but two months later, in October, 2000, he quit, submitting his resignation after just seven months with the company. This took place after the sale of the GlobalCenter division to Exodus Communications, in a deal in which Hindery made $251 million.
Hinderey was replaced by Thomas Casey, a forty-eight year old lawyer who came to Global Crossing from Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, where he was co-head of the global telecom investment banking group. Prior to that time, Casey had worked as an attorney for the Federal Communications Commission
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
and the Department of Justice
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
. Reports by individuals close to the company to the media suggested conflicts and power-struggles between Mr. Winnick and CEOs Annunziata and Hindery.
Mergers and Acquisitions
In 1999, the company acquired Frontier Corporation, the former Rochester Telephone Corporation, and renamed the company Global Crossing North America, Inc. It sold the local telephone operations it owned, including the Frontier name, to Citizens CommunicationsCitizens Communications
Frontier Communications Corporation is a telephone company in the United States, mainly serving rural areas and smaller communities. It was known as Citizens Utilities Company until May 2000 and Citizens Communications Company until July 31, 2008....
in 2001, which renamed itself Frontier Communications in 2008.
In 2011, Level 3 Communications
Level 3 Communications
Level 3 Communications is a telecommunications and Internet service provider headquartered in Broomfield, Colorado.It operates a Tier 1 network. The company provides core transport, IP, voice, video and content delivery for most of the medium to large Internet carriers in North America and Europe...
announced its intent to purchase Global Crossing. This transaction is expected to be completed by the end of 2011. On July 27, 2011, the two companies announced their financial data for the second quarter of 2011, and almost all business sectors have a slight increase.
Post-2001 and 2002 bankruptcy filing
Global Crossing was generating a great deal of publicity through things like its NASCARNASCAR
The National Association for Stock Car Auto Racing is a family-owned and -operated business venture that sanctions and governs multiple auto racing sports events. It was founded by Bill France Sr. in 1947–48. As of 2009, the CEO for the company is Brian France, grandson of the late Bill France Sr...
racing sponsorship and the rescue attempt of a Russian submarine, but its business triumphs were lacking. By early 2001, emerging telecommunications carriers and online businesses - two groups Global Crossing had been relying on to build traffic on its network - were fading fast. Walt Disney
Walt Disney
Walter Elias "Walt" Disney was an American film producer, director, screenwriter, voice actor, animator, entrepreneur, entertainer, international icon, and philanthropist, well-known for his influence in the field of entertainment during the 20th century. Along with his brother Roy O...
withdrew from its money-losing site Go.com
Go.com
Go.com is a web portal first launched by Jeff Gold, and now operated by the Walt Disney Internet Group, which is a part of The Walt Disney Company. The portal includes content from ABC News, ESPN, and FamilyFun.com, all of which are associated with Disney and are hosted under a .go.com name...
and eToys
EToys.com
eToys.com is a retail website that sells toys via the Internet. It was established by a startup company of the same name during the dotcom boom, but the company went bankrupt towards the end of the boom, after which the site went through a number of changes of ownership, and was acquired by Toys...
announced it was running out of cash. Additionally, the parade of telecom companies filing bankruptcy began that year, including Global Crossing customers Northpoint Communications Group
NorthPoint Communications
NorthPoint Communications was a CLEC , focused on data transmission rather than voice...
and GST Telecommunications. Nevertheless, CEO Casey projected continued financial growth with targets at thirty percent in 2001, the year the company's vice president of finance, Roy Olofson, claimed later he had voiced concerns about alleged "last-minute swap transactions" with customers from whom Global Crossing also purchased services. The deals noted by Olofson included a $100 million exchange of capacity with Qwest
Qwest
Qwest Communications International, Inc. was a large United States telecommunications carrier. Qwest provided local service in 14 western U.S. states: Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming.On April...
and a $200 million sale to 360Networks, from whom Global Crossing purchased $150 million of capacity. Global Crossing claimed Olofson's allegations were false, and that he had threatened to file a lawsuit against the company if he was not paid a substantial amount of money. The company stated that its financial and reporting items had been reviewed both internally and by the company's auditor, Arthur Andersen
Arthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
.
In June, 2001, Global Crossing completed its core network, spanning four continents, 27 countries and 200 major cities. The same month, it completed the sale of its local telephone-company business on June 29. Casey's confidence in the company's strength seemingly maintained that of many investment bankers and investors. Third-quarter filings for 2001, however, were considered disappointing, and Global Crossing announced plans to dispose of Global Marine. It was announced that Asia Global Crossing, of which Global Crossing owned fifty-nine percent, had entered discussions to merge in October 2001, after John Legere, Asia's CEO, became head of both companies. The merger discussions ended in November 2001 and Legere was replaced as Asia Global Crossing CEO in January 2002 and was removed from the Asia Global Crossing board in April 2002.
By this time, the finance world was losing confidence rapidly, and Global Crossing's stock price continued to fall, hitting five dollars a share by November, 2001. On December 20, it was revealed that Asia Global Crossing had requested $400 million from a credit line granted at its spinoff in 2000 by Global Crossing. Global Crossing refused to fund the line and a month later, in January, 2002, the company filed for Chapter 11 bankruptcy protection and its assets were ultimately sold to Asia Netcom, a subsidiary of China Netcom. At the same time, a letter of intent was filed by Global Crossing to sell control of the company, seventy-nine percent, to a joint venture between Hong Kong-based Hutchison Whampoa
Hutchison Whampoa
Hutchison Whampoa Limited or HWL of Hong Kong is a Fortune 500 company and one of the largest companies listed on the Hong Kong Stock Exchange. HWL is an international corporation with a diverse array of holdings which includes the world's biggest port and telecommunication operations in 14...
and Singapore Technologies Telemedia. Global Crossing's bankruptcy filing listed total assets of $22.4 billion and debts amounting to $12.4 billion. If ranked by assets, Global Crossing's bankruptcy is the seventh largest filing in American history.
On January 28, 2002, Global Crossing announced that it signed a letter of intent with Hutchison Whampoa Limited and Singapore Technologies Telemedia Pte. Ltd. (ST Telemedia) for a cash investment for a joint majority stake in the company's equity in connection with a restructuring of the company's balance sheet.
In April 2003, ST Telemedia announced it would assume the rights and obligations of Hutchison to invest in Global Crossing, increasing its original investment of 61.5 percent ownership interest in the reorganized Global Crossing.
New Global Crossing Emerges in 2004
After obtaining all necessary regulatory approvals, Global Crossing emerged from restructuring on December 9, 2003, with its core network intact, and a streamlined business model in place. The newly restructured Global Crossing began trading on NASDAQ on January 22, 2004, under the symbol GLBC.In October 2006, Global Crossing announced the acquisition of UK-based Fibernet, followed two weeks later with the announcement of its intention to also acquire Impsat, a leading provider of telecom and Internet services in Latin America.
Fibernet's roster of enterprise and carrier customers in the financial, insurance and retail segments complements Global Crossing's market position in the UK government and rail sectors. The acquisition of Impsat brings Global Crossing a local presence in seven Latin American countries, Impsat’s 10,000 kilometer, extensive IP-based inter-regional network, 15 metropolitan networks and 15 advanced hosting centers, which provide additional services to Global Crossing’s Latin American operations.
Corporate and executive spending
Global Crossing's rapid rise and fall attracted tremendous attention and it was quickly revealed that the company, particularly its executives, lavishly spent money on "themselves and their digs." Four of Global Crossing's CEOs received at least $23 million in personal loans from the company, some of which were forgiven entirely even when bankruptcy was becoming a greater possibility. These same CEOs also received over $13.5 million in after-tax signing bonuses along with lucrative stock options. Between 1998 and 2001, Winnick sold approximately $420 million in Global Crossing stock. Other executives with the company sold an additional $900 million, totaling $1.3 billion, an amount equal to the EnronEnron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
inside sales for the same period.
Pacific Capital Group, Winnick's investment company, was the owner of Global Crossing's palatial office space in Beverly Hills, California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
. PCG had paid $41.5 million for the office space in 1998 and spent an additional $9 million on renovations. Global Crossing, its newest "tenant" paid rent to PCG of $400,000 a month. Winnick's personal office, called the "Oval Office," contained furniture priced at over $1 million, and hanging outside the entrance to the office was a painting by Pablo Picasso
Pablo Picasso
Pablo Diego José Francisco de Paula Juan Nepomuceno María de los Remedios Cipriano de la Santísima Trinidad Ruiz y Picasso known as Pablo Ruiz Picasso was a Spanish expatriate painter, sculptor, printmaker, ceramicist, and stage designer, one of the greatest and most influential artists of the...
, purchased for $15 million. The Beverly Hills office was not the only extravagant office space - Global Crossing's office in New York City, located at 80 Pine Street (currently no longer in use), underwent an extensive renovation. David Walsh, founder of IXNet (which Global Crossing purchased in February, 2000 for $3.4 billion), headed the Manhattan office and was acting Chief Operating Officer. Walsh oversaw the installation of a custom-made lighting system to emulate fiber optic strands with neon lighting. A staircase linking the 29th and 30th floors, installed but then changed at a cost of $250,000, was acknowledged openly by Walsh.
Additionally, Global Crossing operated five corporate jets, including a Boeing 737
Boeing 737
The Boeing 737 is a short- to medium-range, twin-engine narrow-body jet airliner. Originally developed as a shorter, lower-cost twin-engine airliner derived from Boeing's 707 and 727, the 737 has developed into a family of nine passenger models with a capacity of 85 to 215 passengers...
, a Challenger, a Gulfstream
Gulfstream V
The Gulfstream V is a business jet aircraft produced by Gulfstream Aerospace. It is also used by the US military under the designation C-37A. The G500 and G550 are improved versions which are currently in production...
, an Astra
IAI Astra
|-See also:-External links:...
and a seven-seater, when, according to one former executive, it needed two jets maximum. Employees reported reckless spending in other areas as well, including the purchase of new accounting software costing $150 million when accounting department staff indicated the current software did not need updating. It was later discovered the software was never even installed.
Gary Winnick's spending was criticized and he was condemned by many employees, many of whom had losses beyond their jobs when the company filed bankruptcy. Even as the company's financial situation went from questionable to grim, work continued on Winnick's Bel Air mansion, valued at $92 million and considered the most expensive home purchased in Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
(and by some reports, American) history. Winnick purchased the 30000 square feet (2,787.1 m²) mansion on 9 acres (36,421.7 m²), known as Casa Encantada, in September 2000 from David Murdock. Winnick paid $66 million of the purchase price in cash. After the acquisition, much of the house was renovated, new mechanical and electrical systems were completely updated and a service wing was converted into a studio for his wife Karen Winnick. The estate includes tennis courts, a swimming pool, pool house, and priceless views of Los Angeles. Prior to Murdock, the original house had been owned by Conrad Hilton
Conrad Hilton
Conrad Nicholson Hilton was an American businessman and investor. He is well known for being the founder of the Hilton Hotels chain.-Early life:Hilton was born in San Antonio, New Mexico...
, founder of Hilton Hotels
Hilton Hotels
Hilton Hotels & Resorts is an international chain of full-service hotels and resorts founded by Conrad Hilton and now owned by Hilton Worldwide. Hilton hotels are either owned by, managed by, or franchised to independent operators by Hilton Worldwide. Hilton Hotels became the first coast-to-coast...
. Winnick stated publicly and accurately that the 64-year old estate was being "updated and freshened."
With his wife Karen, a children's book author and co-founder of the Gary & Karen Winnick Foundation, Gary Winnick gave extensively to charity. To the Simon Wiesenthal Center
Simon Wiesenthal Center
The Simon Wiesenthal Center , with headquarters in Los Angeles, California, was established in 1977 and named for Simon Wiesenthal, the Nazi hunter. According to its mission statement, it is "an international Jewish human rights organization dedicated to repairing the world one step at a time...
, a Jewish center in Los Angeles committed to fighting prejudice and hate crimes, Winnick pledged $40 million for the construction of a branch to be located in Jerusalem that will be called the Winnick Center for Tolerance. Another Jewish center, the Skirball Center, received a $5 million donation, and the Winnick Foundation pledged $3 million to a Chabad girls' school in West Los Angeles. A total of $100 million was given to other charities, including the Los Angeles Zoo
Los Angeles Zoo
The Los Angeles Zoo , is a zoo founded in 1966 and located in Los Angeles, California. The City of Los Angeles owns the entire zoo, its land and facilities, and the animals...
and the Los Angeles Public Library
Los Angeles Public Library
The Los Angeles Public Library system serves the residents of Los Angeles, California, United States. With over 6 million volumes, LAPL is one of the largest publicly funded library systems in the world. The system is overseen by a Board of Library Commissioners with five members appointed by the...
.
Hutchison Whampoa
Hutchison Whampoa
Hutchison Whampoa Limited or HWL of Hong Kong is a Fortune 500 company and one of the largest companies listed on the Hong Kong Stock Exchange. HWL is an international corporation with a diverse array of holdings which includes the world's biggest port and telecommunication operations in 14...
withdrew from its planned purchase of Global Crossing after the Committee on Foreign Investment in the United States made it clear that the purchase would not be approved with Hutchison as a purchaser. Singapore Technologies Telemedia acted alone and purchased Global Crossing for $750 million, buying it out of bankruptcy and terminating Gary Winnick's control of the company. Investigations were conducted by the SEC
United States Securities and Exchange Commission
The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...
and resulted in former CEO Thomas Casey, former chief financial officer Dan Cohrs, and former president of finance, Joseph Perrone receiving fines of $100,000 each. The SEC closed its investigation of Gary Winnick, who received no punitive action or fines.
In 2004, Global Crossing settled a class action lawsuit over the losses the employees incurred from their pensions and 401Ks. Investors and former employees, represented by Grant & Eisenhofer P.A.
Grant & Eisenhofer P.A.
Grant & Eisenhofer is an international boutique law firm with a focus on securities and complex litigation, corporate governance, false claims/wage and hour litigation, and portfolio monitoring. Stuart M. Grant and Jay W. Eisenhofer founded the primary office in Wilmington, Delaware in 1997...
, received $325 million in the settlement. Gary Winnick, the founder and former chairman of Global Crossing contributed $30 million to the settlement. Simpson Thacher & Bartlett
Simpson Thacher & Bartlett
Simpson Thacher & Bartlett LLP is a law firm headquartered in New York City which employs over 800 attorneys in ten offices worldwide. The firm is highly regarded for its litigation and corporate practices, with special attention focused on its mergers and acquisitions specialty...
, Global Crossing's law firm, paid $19.5 million, even though the firm was not named as a defendant. The $30 million from Mr. Winnick is in addition to a $25 million fund he set up in December 2002 for Global Crossing employees who lost money investing in the retirement plan. Under the terms of the settlement, investors who bought Global Crossing securities beginning in 1999 received $245 million and former employees received $80 million. This amount was only a fraction of the losses the former employees incurred on their retirement plans. Mr. Winnick made $734 million selling his shares in Global Crossing before it collapsed. Some defendants named in the lawsuit did not participate in the settlement and will continue to litigate the case. Among them are Arthur Andersen, Global Crossing's auditor; Salomon Smith Barney, J.P. Morgan, Goldman Sachs and other investment banks that sold Global Crossing securities; and Jack B. Grubman, the former Salomon Smith Barney telecommunications analyst. They have maintained that they did nothing wrong in their work related to Global Crossing.
Political contributions
Winnick helped Democratic National CommitteeDemocratic National Committee
The Democratic National Committee is the principal organization governing the United States Democratic Party on a day to day basis. While it is responsible for overseeing the process of writing a platform every four years, the DNC's central focus is on campaign and political activity in support...
chairman Terry McAuliffe
Terry McAuliffe
Terence Richard "Terry" McAuliffe is a longtime leader and political advisor for the United States Democratic Party. He served as chairman of the Democratic National Committee from 2001 to 2005. He served as Co-Chairman of President William Jefferson Clinton's 1996 re-election campaign and also...
turn a $100,000 stock investment into $18,000,000. Winnick later gave a million dollars to President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
's presidential library.
In 1998, former U.S. president George H. W. Bush
George H. W. Bush
George Herbert Walker Bush is an American politician who served as the 41st President of the United States . He had previously served as the 43rd Vice President of the United States , a congressman, an ambassador, and Director of Central Intelligence.Bush was born in Milton, Massachusetts, to...
gave a speech in Tokyo on behalf of Global Crossing, for which he was compensated with $50,000 of Global Crossing stock which he sold in 1999 and 2000 for more than $4.5 million.
Global Crossing's political contributions tended to be fairly evenly distributed between Republican and Democratic parties, with co-chairman Winnick tending to favor Democrats and co-chairman Cook favoring Republicans. In 2000, the company gave $250,000 each to the Republican and Democratic Conventions. In 1999, the company hired former assistant attorney general Anne Bingaman, married to Democratic New Mexico Senator Jeff Bingaman
Jeff Bingaman
Jesse Francis "Jeff" Bingaman, Jr. , is the senior U.S. Senator from New Mexico and a member of the Democratic Party...
, as a Washington lobbyist, paying her $2.5 million between January and June 1999 to try to block licensing of an AT&T, MCI, and Sprint consortium cable from the U.S. to Japan. The large bicameral donations have been suggested to be a reason why investigations against the company's upper management did not result in any criminal charges, despite the size of the bankruptcy and the large amount of circumstantial evidence that some sort of malfeasance had occurred.
It has remained a major name in the business, and it also became a corporate partner of various governmental and academic networks, such as the UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
's Immigration and Nationality Directorate, the U.S. government, European academic networks GEANT
GEANT
GÉANT is the main European multi-gigabit computer network for research and education purposes...
, SURFnet
SURFnet
SURFnet is both the name for the organisation that develops, implements and maintains the national research and education network of the Netherlands as well as the network it operates. As one of the first networks linked to the Internet outside the USA the organisation has taken the lead in the...
and others, the US Internet2
Internet2
Internet2 is an advanced not-for-profit US networking consortium led by members from the research and education communities, industry, and government....
and the Canadian CA*Net.
In late 2006, Global Crossing announced acquisitions of Fibernet, a provider of private network services in the UK, and Impsat, an Internet provider in South America.
Since emerging from bankruptcy, the company has attempted to re-focus its business around enterprise customers and de-emphasise its historic wholesale business, with some limited success. A new strategy, articulated in October 2004, has enabled it to turn around its performance in its core business while improving margins. It secured additional funding from its parent STT
STT Communications
STT Communications is a wholly owned subsidiary of Singapore Technologies Telemedia , a private investment holding company part of Temasek Holdings. STT Communications has significant stakes in Global Crossing, U Mobile, SkyCable and StarHub....
in December 2004 and anticipates becoming cash flow positive by the end of 2006.
Corporate information
- Global Crossing corporate website
- Global Crossing Media Center
- Global Crossing Fast Facts (April 2010)
- Global Crossing Blog: Official Global Crossing Blog
- Global Crossing LATAM Blog: Official Global Crossing Latin America Blog
- Official Global Crossing Twitter Account
- Global Crossing Annual Reports
- Yahoo! - Global Crossing Ltd. Company Profile