Global Crossing Head Willing to Make Up – Some – 401(k) Losses
Not only did Winnick make the promise in front of a hostile House subcommittee hearing, he also challenged other company executives – specifically those at XO, Qwest Communications, and McLeodUSA – to follow his example. ‘Step right up and write a check,’ he said, according to Dow Jones.
Winnick strenuously denied that he or others at the company had engaged in insider trading or fraud. However, he said that as chairman of the ailing company, he owed it to the firm’s 14,000 current and former employees to make them whole for the losses they suffered as the value of their 401(k) accounts plummeted along with the company’s share price.
He said he wanted to help the “Miss Crumplers of the world,” appearing after hours of testimony from former Global Crossing employees, including Lenette Crumpler who told the committee she lost her entire 401(k) savings from a 31-year period — $86,000 — when Global Crossing went bankrupt in January (see Global Crossing Workers File Company Stock Suit ). Global Crossing had acquired the telephone company Crumpler worked for, Frontier, in 1999.
While subcommittee chairman Representative Jim Greenwood (R-Pennsylvania) described Winnick’s $25 million offer as “magnanimous,” others were skeptical, if not cynical. ‘I think he needs to add a zero to it,’ said attorney Lynn Sarko, who represents Global Crossing workers, saying the offer was less than one-tenth of the losses Global Crossing employees had suffered. Indeed, Representative Greenwood commented that investors had lost $54 billion in the collapse of Global Crossing.
Sarko, a Seattle attorney, noted that Winnick was only offering to pay back what employees had contributed to the retirement plan after Global Crossing acquired Frontier in 1999, and not the amounts they had paid in prior to that time.
Joseph Nacchio, the former Qwest chief executive who testified later Tuesday, firmly refused to follow Winnick’s ‘lead.’ Nacchio sold $235 million in Qwest stock but said the company is not bankrupt and maintains retirement plans.
“Mr. Winnick’s company went bankrupt. Qwest is not a bankrupt company,” Nacchio said. “It has a pension plan, and there are lots of reasons why the telecommunications industry is on hard times.” Nacchio, ousted from Qwest in June, said his own severance package was worth about $12 million, according to Reuters (see Shareholders Name Qwest, Nortel in 401(k) Suits ).
Separately, WorldCom got approval to pay full severance payments to thousands of laid-off workers whose termination benefits were abruptly cut off in July when the nation’s No. 2 long-distance carrier filed for bankruptcy-court protection. Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York approved the request to pay a total of about $36 million in severance, commissions, health insurance premiums, and unused vacation pay to laid off workers.
In order to get their severance, employees must sign a release that bars them from later suing the company. The release has been criticized as overly broad, leading some employees to fear it would interfere with efforts to sue over losses in their 401(k) retirement plans.
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