Winnick sought a clean getaway in global settlement.

Gary Winnick, the former chairman of Global Crossing Ltd., knows a good deal when he sees one.

Winnick forked over $55 million in last month's $325 million settlement of nearly 70 lawsuits brought by former Global Crossing employees and investors against its executives.

But Winnick paid an instrumental role in pushing for the settlement to get done, and for a good reason. According to his lawyer, he wanted to put an end to the litigation that had dominated his life since 2002, and protect himself against the potential for an even bigger payout including payment of his own legal fees.

"This wasn't about liability, or even about responsibility. It was about how to solve a case and end litigation," said Terry Christensen, Winnick's lawyer. "There are still other lawsuits, but people are able to start to get their lives together."

Winnick and other insiders were sued for allegedly inflating the profits of Global Crossing as the company headed toward bankruptcy in early 2002.

Winnick made more than $860 million when he sold Global Crossing stock, before the capacity swaps that allegedly inflated revenue measures were disclosed to investors, according to the complaint filed by plaintiffs in the case.

Yet the bulk of the settlement--$270 million--was paid by the main insurance carriers that provided directors and officers' insurance to Global Crossing's executives, including Pender Insurance Ltd., based on the Isle of Man, Chubb Insurance Group of Warren, N.J., and American International Group (AIG) of New York.

Lawyers involved in the 14-month long settlement process say that Winnick played an active role by exerting pressure on the insurance companies to agree to the settlement. The insurers faced the possibility of being sued by Winnick if they refused to act in good faith.

"Obviously Gary Winnick made a decision to part with a fair amount of money because it was a good deal for him," said Gary Gotto, a lawyer with Keller Rorhback LLP in Phoenix, the law firm that represents 20,000 current and former employees of Global Crossing who lost more than $116 million in company 401(k) plans.

"Someone with Gary Winnick's resources can be a formidable person to an insurance carrier that could get tagged for far more liability," he said.

The settlement, which produced 270,000 pages of documents and 80,000 e-mails, nearly got derailed in September 2003.

At that time, Winnick flew to New York to meet with U.S. Magistrate Judge Michael Dolinger, who has been credited with getting all parties in the case to compromise. Among the issues being discussed was Winnick's $25 million pledge to reimburse employees for their losses. He made the promise during his Congressional testimony in October 2002.

The former Global Crossing employees, who had sued under the Employee Retirement Income Security Act, known as ERISA, wanted to keep the $25 million--and continue suing Winnick.

How much?

Moreover, there was the issue of how much Winnick was willing to pay to settle some of the securities claims brought by investors.

Winnick wanted to avoid future litigation with former employees, and also settle the securities litigation with limited additional contributions. It became clear at the meeting with Dolinger that the settlement would have be higher, Christensen said.

"There was still a gap to be bridged because everyone considered Gary to be the one with the deep pockets," said Christensen, nameplate partner with the Los Angeles firm of Christensen Miller Fink Jacobs Glaser Weil & Shapiro LLP.

"Gary felt that at a certain level he would (agree to the settlement) because it would put to bed the class actions and the ERISA cases and it would mean that he and all the officers and directors of the company would have solved the problem."

The settlement ensures that Winnick will walk away from Global Crossing with hundreds of millions of dollars intact. But his lawyer offers another view, that of Winnick and other Global Crossing officials whose lives were put on hold by 2 1/2 years of litigation.

"It's a very onerous thing," Christensen said. "They're hit with five lawsuits a day and it goes on for 45 to 60 days. They're sued in Los Angeles in federal court, in state court, in Texas, in New York--every day a lawyer calls them up and says another lawsuit has been filed."

Some lawsuits are still pending. But now that the original 17 Erisa class actions and 50 securities lawsuits have been resolved, Global Crossing executives can "start to get their lives together," Christensen said.

The other officers sued include Global Crossing's former general counsel, Jim Gorton, now a partner at Latham & Watkins; David Lee, co-founder of the company and now managing director of Clarity. Partners LP, a private equity firm in Beverly Hills; and co-Chairman Lodwrick Cook, the former Atlantic Richfield chairman and chief executive, who now works at Winnick's Beverly Hills investment firm, Pacific Capital Group Inc.

No jurisdiction

Compounding the problem in reaching a settlement were other lawsuits against the British insurance company Pender. The suits were filed by other telecom carriers it had insured, and Pender had a limited pot of money to pay on all claims, which turned the litigation into a feeding frenzy because payouts would be made on a "first come, first serve" basis.

Moreover, Pender maintained that as a British carrier, it was not subject to ERISA laws and, therefore, was not liable to pay for losses incurred by employees.

"The position of the Pender policy was that pigs would fly before the policy paid money to the ERISA class because they didn't believe the policy covered ERISA cases," said Lynn Sarko, the lead plaintiff's lawyer at Keller Rohrback's Seattle office, which hired a British law firm last year to prepare to litigate the case in England.

In addition, some of the reinsurers, who are hired by the main insurers to spread their risk, had gone out of business. "There were some real practical difficulties in the settlement and one of the creative issues was to figure a way to tap the British policy," Sarko said.

Another challenge was to bring in additional defendants who were not named in the original lawsuit.

One New York law firm, Simpson Thacher & Bartlett LLP, agreed to pay $19.5 million into the settlement. A special committee investigating Global Crossing's bankruptcy for the court suggested that Global Crossing sue Simpson Thacher, based on the legal advice provided by Simpson Thacher partner Rhett Brandon, who was Global Crossing's acting general counsel.

Several lawyers said that throughout the negotiations, Winnick acted like a typical businessman.

"Winnick kept pointing out that he was paying $25 million and it was unprecedented for an individual who wasn't criminally charged," said one lawyer involved in the settlement. "He's a businessman. Any time he had leverage he would use it. It was like he was in the middle of a game."

This kept Winnick in the loop throughout the negotiations. Plaintiffs needed to get the insurance money before it evaporated; the insurers would not agree until Winnick signed off because he could sue them. In the end, the trade-off called for him to put up the additional $30 million to settle some of the securities cases, and allow the insurance companies to pay off the remaining policies for the case.

"Did we have leverage?" Christensen asked, referring to Winnick's position. "Sure we did."