The lawsuit was filed in January 2002 by the Public Employees Retirement System of Ohio and the State Teachers’ Retirement System of Ohio and later consolidated with other suits against Global Crossing. Those two pension funds lost about $110 million in Global Crossing securities, according to the NY Times (see Buckeye State Gains Lead in Global Crossing Case ).
The plaintiffs had accused Winnick and other Global Crossing officers of defrauding them by distorting the company’s financial reports with questionable dealings and deceptive comments.
Winnick, the founder and former chairman of Global Crossing, will contribute $30 million to the settlement, while Simpson Thacher & Bartlett, Global Crossing’s law firm, will pay $19.5 million, even though the firm was not named as a defendant, according to the NY Times. The tentative settlement was approved by Judge Gerard E. Lynch of Federal District Court in Lower Manhattan.
Under the terms of the settlement, investors who bought Global Crossing securities beginning in 1999 will receive $245 million and former employees will receive $80 million. The $30 million from 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.
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 about three months, the settlement will be submitted to a final approval hearing before Judge Lynch. The Pender Insurance Company, which insured the officers and directors of Global Crossing and its affiliate, Asia Global Crossing, paid the bulk of the settlement.
“This is a very significant settlement,” Jay W. Eisenhofer, a lawyer at Wilmington-based rant & Eisenhofer who was lead counsel to the pension funds in the case, told the NY Times. “And it has the added benefit of holding individuals personally responsible, which is very difficult to accomplish in these cases. That’s the best message the case sends, that people who commit these kinds of acts are at risk of having to dip into their own pockets.”