Ohio Attorney General Jim Petro announced a partial settlement has been reached in the class action lawsuit against directors and officers of bankrupt telecommunications firm Global Crossing Ltd., that will include compensation to investors from the personal fortune of former CEO Gary Winnick.
The suit is still pending against the company’s accounting firm, Arthur Anderson, the investment firm of Salomon Smith Barney and others.
Ohio was named lead plaintiff in the litigation after the Public Employees Retirement System and the State Teachers Retirement Systems of Ohio joined in the lawsuit in 2002. Global Crossing filed for protection from creditors after reported revelations that the company and its auditing firm, Arthur Anderson, issued misleading and fraudulent financial statements that gave a false picture of the company’s fiscal health.
“This settlement is notable because it holds corporate officials personally responsible for their actions as stewards of investors’ funds,” said Petro. “This litigation sends a message to those with fiduciary responsibilities that we will not stand by as they perpetrate fraud.”
Global Crossing Ltd. essentially has no assets, and creditors are also seeking billions of dollars from the company’s former officers and directors, and their insurers.
Under the reported terms of the $245 million settlement, which must be approved by a federal judge, Winnick will pay $30 million, and the company’s insurers will pay an additional $195 million to investors on behalf of the other officers and directors. Simpson, Thacher & Bartlett, LLP, the company’s former outside legal counsel, will contribute $19.5 million to the settlement.
The agreement covers only securities fraud violations. A separate, complete settlement of claims brought under the Employee Retirement Income Security Act, which protects employee pension funds, has been reached for $79 million.
Ohio’s pension funds will receive $1 million or more in compensation if the settlement is approved by the federal Court. The final amount will be determined based on the number of other class members, which numbers in the millions of investors, who participate in the settlement.
Was this article valuable?
Here are more articles you may enjoy.