Similar to the 401(k) plan at Enron in which participants had to take their company matching contribution in company stock, the Global workers claim they were accumulating Global stock at a time when the company was coping with financial problems and the shares’ value was plummeting.
Global officials named as defendants breached their fiduciary duty by not properly disclosing Global’s true financial problems and by not warning participants about the potential risks of overaccumulating company stock, the lawsuit alleges
Joins Other Suits
Global Crossing’s stock, which once traded as high as $64 per share, has lost about 96% of its value in the past 12 months. Recently, the company, which sold computer bandwith, sought protection from a US Bankruptcy Court.
The latest lawsuit joins two others recently filed against Global Crossing, which also charged company executives with a fiduciary breach over employee 401(k) losses from company stock.
Former Global employee Scott Johnson, named plaintiff in
the latest suit, charged that company executives are
obliged under ERISA to make good on losses suffered as a
result of a fiduciary duty breach – a sum the suit
estimated at “tens of millions of dollars.”
Named as defendants in the Johnson complaint are 17 Global Crossing executives and directors, including Gary Winnick, the former chairman, who has come under scrutiny for his decision to sell almost 10 million shares of his Global Crossing stock for nearly $124 million just before the company’s bankruptcy.
According to the latest suit, Global’s financial woes centered around the building of a new global fiber-optic internet network on which the company was to offer bandwith. The suit said Global’s debt load connected to the project ballooned to $7.2 billion by 2000 – an amount which eventual sunk the company when bandwith demand began drying up.
In October 2001, Global Crossing issued an announcement that its third-quarter revenue would be $400 million less than predicted.
The case is Johnson v. Winnick, C.D. Calif., No. CV 02-02070 DT.