Under the settlement, which still requires court approval, Global Crossing founder and former Chairman Gary Winnick will pay $25 million from an irrevocable escrow account, and former officers and directors including Winnick, former Chief Executive Thomas Casey, and ex-members of the Employee Benefits Committee will pay an additional $54 million from insurance policies.
The Global Crossing Retirement Savings Plan lost tens of millions of dollars as a result of its extensive stock holdings in Global Crossing stock, which lost virtually all of its value, according to the Department of Labor. The settlement covers the two former inside directors of Global Crossing, Thomas Casey (former Chief Executive Officer) and Gary Winnick (former Chairman of the Board), as well as the three former members of the Employee Benefits Committee, Dan J. Cohrs, Joseph Perrone, and John Comparin. Under the terms of the settlement, the former officers and directors are prohibited from acting as fiduciaries to ERISA-covered benefit plans.
“I am pleased that the Global Crossing workers, retirees and their families will receive a significant financial recovery,” said U.S. Secretary of Labor Elaine L. Chao. “Fiduciaries have a serious and significant responsibility to protect the long term pension security of their workers. I hope this lesson gets through to others.”
Similar to the 401(k) plan at Enron in which participants had to take their company matching contribution in company stock, Global Crossing workers in March 2002 claimed they were still accumulating Global stock at a time when the company was coping with financial problems and the shares’ value was plummeting. The suit, filed in March 2002, alleged that company officials breached their fiduciary duty by not properly disclosing the firm’s true financial problems and by not warning participants about the potential risks of overaccumulating company stock (see Global Crossing Workers File Company Stock Suit ). Another employee suit was filed in February of that year (see Participants Bring Another Company Stock Complaint ).
In October 2002, Winnick had told a House subcommittee hearing that he would personally make up $25 million of the losses incurred by workers in the firm’s 401(k) plan (see Global Crossing Head Willing to Make Up – Some – 401(k) Losses ).
In March, Global Crossing settled a related private lawsuit with shareholders, workers and employees for $325 million, including $55 million from Winnick (See Global Crossing Execs Come to Terms with Ohio-led Suit ). The Department of Labor’s agreement with the former Global Crossing directors and officers was part of the prior $325 million private settlement, a settlement that contained a clause that allowed plaintiffs to back out of the agreement if the Department of Labor’s investigation was not resolved to their satisfaction.
Two weeks ago in another company stock suit, former WorldCom Inc. Chief Executive Officer Bernard Ebbers and 18 ex-WorldCom officials reached a settlement, which is still pending approval by US District Judge Denise Cote (see Ebbers, WorldCom Executives Agree to $51M Suit Settlement ).