Hightower Needs Some Perspective

When is selling stock "looting"?

Jim Hightower on Gary Winnick, founder and chairman (not the CEO) of Global Crossing:

For example, take a whiff of the pile of cash amassed by Gary Winnick, the corporate hustler recently turned "philanthropist." Winnick made a fortune as a honcho of the telecommunications outfit Global Crossing. He actually knew next to nothing about the industry, but he was hell on hype, so Wall Street investors threw tons of money at his firm. Alas, though, the world didn't buy the product that Global Crossing was peddling, and last year the corporation began to collapse.

Before investors and employees were told about the problems, however, Gary ever so quietly began selling off his own Global Crossing stock, reaping almost three-quarters of a billion dollars before the stock became worthless and the company went bankrupt. Thousands of employees lost their jobs and their retirement savings.

[...]

While denying that he had done anything wrong, Gary puffed himself up in a magnanimous pose before the committee and offered to write a check for $25 million to cover a fraction of the retirement money employees lost. He even turned into a moral proselytizer, calling on other CEOs who made a similar killing "to step up and write a check." Then, donning a halo, he declared: "The only legacy I'm going to leave this planet with is my name."

Yes, Gary, and your name is mud! He loots about $750 million, then he wants us to genuflect at the "generosity" of his offer to give $25 million of it back.

Hightower makes no mention of Democratic National Committee chairman Terry McAuliffe and the stock deals he was involved in. However, that isn't the point.

What is the point is Hightower's use of the word "loot."

Sure it may sound good to put things like that, but going just off what Hightower gives us, Winnick "looted" nothing. What he did was sell his stock before it crashed. As part of the highest level of executives running the company, he probably knew about the problems coming down the road. His money was invested in the company and, just like any other person with money invested in stock, wanted to capitalize on his investment as much as possible. If I knew a company I had money invested in was about to suffer a fatal or crushing blow, I would change my investment portfolio accordingly.

It doesn't really matter how I would find out. It's my money and it's my potentially heavy loss at stake here. Does Hightower expect investors to watch their portfolio implode? Isn't it our right to make our own investing decisions? Would he ignore his retirement package's meltdown? It doesn't matter if someone has more disposable income than another. It's about doing what you think it right for yourself and your things.

Since Winnick and the other executives probably knew about the problems ahead of time, it reflects poorly upon them by not going public with the information (if any; however the billion-dollars-plus of stock the executives sold is just as public a statement as any press release), but none of this could consititute "looting" anyone. You loot someone when you take things from them without their permission. That was Winnick's money to invest or divest and he sold the stock over a period of two years. Plenty of time for people to notice, which is part of the responsibility of being an investor. You either act as your own agent and pay attention to individual stocks and mutual funds, or you bear the responsibility of picking someone else to manage your portfolio for you.

Additionally, Hightower himself recognizes the true failure of Global Crossing: it's inability to attract business. It was able to attract plenty of investment capital, but it wasn't successful in using it. People bought the hype, woke up after the party, and puked. Again, part of the responsibilty of being an investor is to be at least somewhat informed about where your money goes. The reason why the stock market is generally so profitable is because there is more risk involved than in other common forms of investment.

None of this has anything to do with theft, unless Hightower neglected to mention something, which is possible because there are allegations about deliberate accounting lies and manipulations.

This Capitalism Magazine article talks about the same thing, but in regards to ImClone's Dr. Samuel Waksal.

Posted by Drizzten at November 05, 2002 01:07 AM