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If Enron (ENE
) has become Exhibit A for campaign-finance reform, Global Crossing's (GX
) adventures in Washington make for an even more audacious--and cautionary--tale of influence-buying. While Enron spent years cultivating lawmakers and party chieftains, the telecom upstart shot to the top ranks of political donors almost overnight. Global Crossing, which filed for bankruptcy on Jan. 28, became a lobbying powerhouse just as fast, as it sought help from lawmakers and regulators to expand its international cable network.
Global Crossing, founded in 1997 by Gary Winnick, a former junk-bond salesman and associate of Michael Milken, contributed $2.9 million to candidates and political parties during the 2000 election, up from just $34,000 in 1998, according to the nonpartisan Center for Responsive Politics (CRP). That made Global Crossing, based in Beverly Hills and Bermuda, the fifth-highest donor among communications companies--ahead of WorldCom and BellSouth. Global even topped Enron's $2.4 million in such donations for 2000. "They came out of nowhere and papered the town with money," says Larry Makinson, executive director of CRP.
The then-high-flying telecom was an evenhanded giver: Of its total $3.6 million in contributions since 1998, Republicans pocketed 53%, Democrats got 47%. Top recipients in Congress were key figures in telecom regulation: Senator John McCain (R-Ariz.) got $31,000, and Representative Edward J. Markey (D-Mass.), $12,500. In 1999, on behalf of Global Crossing, McCain asked the Federal Communications Commission to encourage the development of undersea telecom cables.
The high point of Global Crossing's nonideological courtship was the summer of 2000. The company dished out $250,000 to each party's convention, hosted lavish parties for pols such as Senate Majority Leader Tom Daschle (D-S.D.), and provided all of the Web hosting and connections for the GOP's confab.
Winnick collected powerful friends the way some moguls collect art. The company's onetime president, Leo Hindery Jr., is a top Democratic fund-raiser. Its vice-chairman, Lodwrick Cook, a former ARCO exec, is a prominent GOP giver and friend of ex-President George Bush. In 1998, Bush pere made a speech in Tokyo on behalf of Global Crossing and pocketed shares of stock in lieu of $80,000 for his fee. His holdings were worth millions a year later, when he filed papers to sell some shares.
In 1999, Global Crossing was planning to lay a transpacific fiber-optic cable and faced competition from a powerful consortium of companies, including AT&T (T
) and WorldCom (WCOM
). Winnick hired Anne Bingaman, former Justice Dept. antitrust chief from 1993-96, and Greg Simon, a former domestic policy adviser to Vice-President Al Gore, to lobby the Federal Communications Commission. Global Crossing paid Bingaman, now chairman of Valor Communications in Irving, Tex., an unprecedented $2.5 million for six months' work. The company failed to block the rival group from getting a license but did force it to modify its proposal in ways so it couldn't dominate the market.
Global Crossing wasn't the only brash New Economy company to cut a swath in Washington. But it raised eyebrows because its largesse was so out of proportion to its needs--mostly routine regulatory approvals rather than high-profile legislation. "With Enron, you can list lots of examples of doors that were opened to them," says CRP analyst Holly Bailey. "With Global Crossing, it's hard to fill a page." For Winnick, who was in a hurry to build a global telecom system, the price may have been right. He's now learning, though, as Enron has, that paying the pols won't keep the debt collectors away.
Corrections and Clarifications
"Global Crossing tossed more cash around town than Enron" (Washington Outlook, Feb. 11) should have read: "Of its total $3.6 million in contributions since 1997, Republicans pocketed 45%, and Democrats got 55%." These figures reflect amended data from the nonpartisan Center for Responsive Politics.
At least one member of the green-eyeshade set is taking his job seriously. Just hours after the State of the Union address, U.S. Comptroller General David M. Walker, the feds' top auditor, said he would sue the White House to obtain details on Dick Cheney's meetings with energy interests last year. Walker, as head of Congress' investigative General Accounting Office, wants the Veep to disclose who was there and what they discussed while Cheney was crafting energy policy.
Enron and Cheney aren't Walker's only targets. On Jan. 25, Walker, a former partner at Arthur Andersen, moved to force accounting firms to apply a higher standard to their government audits than to their private ones. Walker hopes his new rules will help the push for stiffer overall standards. He has invited execs from the Big Five, FASB, the Conference Board, and others to a Feb. 25 closed-door meeting at which he hopes to persuade them to tighten their self-regulation, too. A summary of that meeting will be made public, Walker assures BusinessWeek.
What is Walker getting for his efforts? Serious heat from Republicans, who are steamed that Walker would butt heads with the White House just a day after Bush's Big Speech. Others question his stance on accounting regs,given his former role at Andersen. "We need a GAO to investigate the GAO," says one GOP aide. But Walker might be the only person in Washington diving into the Enron scandal without risk. An independent, Bill Clinton appointed him to a 15-year term in 1998. The only way to get rid of him is impeachment.