Global Crossing: The $47 Billion Fiber Giant That Never Turned a Profit

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Global Crossing was founded in March 1997 by Gary Winnick, a former bond manager at Drexel Burnham Lambert, with colleagues from the Canadian Imperial Bank of Commerce. It started with a $35 million investment, was legally based in Bermuda while operating from New Jersey, and set out to be a Tier 1 carrier owning undersea and land fiber, becoming the first global provider to deploy IPv6 natively. In 1999 it bought Global Marine Systems and its cable-laying fleet for $885 million, Frontier for $9.9 billion and Racal Telecom for $1.65 billion, and formed the $1.3 billion Asia Global Crossing venture with SoftBank and Microsoft. It reached a $47 billion valuation without a single profitable year. AT&T veteran Robert Annunziata resigned after 13 months with $160 million, and the company lost $1.4 billion in 2000.

Successor Leo Hindery sold the GlobalCenter web hosting unit to Exodus Communications for $6.5 billion in stock that was worth $1.95 billion when the deal closed in 2001. Under Tom Casey, Global Crossing discussed a $650 million capacity swap with Enron, the kind of deal in which indefeasible rights of use could be booked as immediate revenue while the matching cost was spread over decades. In the fourth quarter of 2001 it lost $3.4 billion on $793 million in revenue, and it filed for bankruptcy in January 2002 while paying $600 million a year in interest. Employees lost jobs and pensions, while executives had sold $1.32 billion in stock beforehand, including $420 million by Winnick.

• In 2000 Global Crossing gave $250,000 each to the Republican and Democratic national conventions.
• Lobbyist Anne Bingaman was paid $2.5 million for six months of work pressing the FCC to block a rival U.S.-Japan cable.
• When the Russian submarine Kursk sank in August 2000, the company held a British Defence Ministry contract to operate the LR5 rescue submersible.
• Winnick and other former executives paid $324 million in 2004 to settle securities fraud lawsuits.
• Global Crossing emerged from bankruptcy in 2003 and was bought by Level 3 Communications for $3 billion in 2011.