GREED GOES BOTH WAYS
Warren suggested I take time out from Enron-bashing to review the situation at another big bankruptcy, Global Crossing, a telecom firm that went belly up Monday after reporting $11 billion in debt.
Business-wise, the situations are vastly different. Global was essentially part of the internet boom - a tech company that raised huge amounts of capital in the markets, had way too high a burn rate, and pissed away their funds before they could find enough customers to make the business profitable. It was formed by Gary Winnick, who according to Fox News, was a donor to the Clinton library as well as to Republican campaigns. Winnick also participated in a golf event with former President Clinton, and actors Sylvester Stallone and Jack Nicholson. Co-chairman Lawd Cooke was heavily involved in the Reagan library.
The executives, who made quite a profit for themselves, were likely greedy as hell. But there are no stories about them misleading investors and the Street while hiding debt off the balance sheet, a la Enron. Analysts have known for months that this company was rolling downhill. As one analyst said in the NYT article, "This was a foregone conclusion. They never had enough customers."
The interesting part of the story comes from the fact that Terry McAuliffe, chairman of the Democratic National Committee, turned a $100,000 investment in Global Crossing the early '90s into $18 million in stocks that he sold three years ago. According to Fox News, McAuliffe said that his relationship to Global Crossing chief Winnick had nothing to do with the windfall, in fact claiming Global Crossing was a "Republican company" that helped to profit the first President Bush, who made $15 million. McAuliffe says while he took risk at the beginning, George H.W. Bush was allowed to buy in late because he gave a couple of speeches in Japan after he left the presidency that made favorable mention of Global Crossing.
Yes, that's right. GB senior also cashed out on Global. He took stock in lieu of an $80,000 fee for speaking to Global Crossing customers in Tokyo in 1999.
McAuliffe was rather unapologetic about the deal, portraying himself as the savvy investor. "It was an investment. It worked. I am happy I made money on that," he said
Frankly, it all smells like sleeze to me. When companies can be the source of stupid sums of wealth for politicians, it can mean nothing but corruption of the democratic process. But my, aren't these business guys smart to play both sides of the poltical spectrum so that when it all goes belly up, everybody is tainted? I wonder if Wharton has added some new courses to the graduate program in buying off the political process?
Another point - I was amazed to find the NY Times story never mentioned the amount of profit Terry McAuliffe made on Global, even though the story was front page news. They didn't even cover it in the web story either, which I suppose could make amends for print deadlines. Hmmm...it almost makes me believe in that liberal media bias rap. Almost.