Former trustee at center of corporate scandal

Gary Winnick, the founder and chairman of embroiled Global Crossing and a former Tufts trustee and significant donor to the University, resigned from his post at the telecommunications company Dec. 31, after it collapsed under $12 billion in debt and allegations of insider trading and unethical bookkeeping practices.

The Securities and Exchange Commission (SEC) is pursuing an inquiry against Winnick and the company, although an SEC spokesperson would not comment on the investigation. A group of investors has also filed a class-action civil suit against Winnick.

But a week before Winnick's resignation from the company, the Justice Department announced that it lacked sufficient evidence to file criminal charges against any of the company's executives, including Winnick.

Winnick was originally selected as a trustee because he is the parent of a Tufts graduate, the husband of a longtime library overseer, and a prominent businessman and philanthropist. He served on the University's Board of Trustees between November 1995 and May 1999.

In the spring of 1998, Winnick and his wife established the Winnick Family Chair in Technology and Entrepreneurship, currently held by Professor Gregory Crane. During the 1999-2000 academic year, Winnick gave $2 million toward financial aid, and has also contributed smaller amounts to Hillel and Tufts' European Center at Talloires.

Winnick became embroiled in controversy after he sold $734 million in company stock just before Global Crossing began to crumble and its stock price plummeted. Allegations surfaced that Winnick based his trading decisions on information not available to the public.

The company's stock, which traded as high as $64.25, has recently traded at about two cents per share. The fruits of Global Crossing's successful years placed Winnick on Forbes Magazine's annual list of the 400 richest Americans since 1998.

After a number of Global Crossing employees lost their savings and retirement funds in the stock plunge, Winnick placed $25 million in a trust fund to help these employees. It is unclear how this money will be distributed to employees, some of whom have complained that the amount is too small.

"I deeply regret that so many good people involved with Global Crossing also suffered significant financial loss," Winnick wrote in his resignation letter to the company's board. "The collapse of the telecommunications industry, however, has taken a terrible toll on employees and investors alike, with an unprecedented loss of billions in investments and tens of thousands of jobs."

Winnick founded Global Crossing, which is incorporated in Bermuda, in 1997, even though he lacked previous experience in the telecommunications industry. Financiers were impressed, however, with his idea of creating a global telecommunications network that would not be linked to existing networks.

In the immediate future, a New York bankruptcy judge will allow Singapore Technologies Telemedia and Hutchison Whampoa of Hong Kong to acquire a majority stake in Global Crossing, as well as its 100,000-mile fiber optic network _ the most extensive in the world _ for $250 million. The sale price amounted to a fraction of the billions Global Crossing spent to build its assets and a third of what the two companies offered to pay in early 2002, when creditors rejected the bid. The deal provided startling proof of how fast the business of fiber-optic networks continues to disintegrate in an environment poisoned by the WorldCom accounting scandal and a global glut of capacity for Web traffic and e-commerce.

Winnick made news at Tufts early in his term as a trustee due to a business connection with Campuslink Communications, the company that provides the University's phone services. Although Winnick served simultaneously as a Tufts Trustee and an investor in Campuslink, then-University President John DiBiaggio dismissed the potential conflict of interest as "an interesting coincidence."

"There's nothing that bars a trustee from having a relationship with the University and a company," Executive Vice President and Treasurer Steven Manos said at the time.

Winnick excused himself from trustee conversations regarding Tufts communications in order to eliminate any bias created by his involvement in Campuslink.

Winnick resigned from the Board in May 1999 when his work at Global Crossing no longer allowed him to attend Board meetings and perform his duties as a trustee to his satisfaction. In his letter of resignation to the Board of Trustees, Winnick cited his "increased frequency of global travel" and "scheduled business commitments" as reasons for his departure, but praised the University and noted his "great disappointment" in having to leave the Board.