CORPORATE CASE STUDY: Global Crossing openly confronts a world of crises

An open, proactive PR strategy has not only helped Global Crossing face scrutiny and allegations, it has fueled widespread optimism regarding the company's post-Chapter 11 prospects.

An open, proactive PR strategy has not only helped Global Crossing face scrutiny and allegations, it has fueled widespread optimism regarding the company's post-Chapter 11 prospects.

Looking back on the scrutiny Global Crossing has faced during his first year as the company's communications chief, Jerry Santos wants to show he has not lost his sense of humor. "I was telling somebody recently that if you name any major government body, it's almost certainly investigating us," chuckles Santos, as he runs through an impromptu list to prove his point. "The US Senate? Yes. The House of Representatives? Yes. The SEC? Yes. The FBI? Yes. The Justice Department? Yes, them too. And it goes on and on. You name almost any part of government, and they've dedicated somebody to look into us." However, after spending the last year navigating nearly nonstop corporate crises, the most recent being last week's resignation of embattled chairman Gary Winnick, Santos is quick to give his laundry list a silver lining. "But folks have been looking at us for quite a while, and so far there's been a lot of smoke, but really no fire," he contends. "That's one of the key messages we've been trying to deliver: We aren't Enron, and we aren't WorldCom - there's been no fraud found here." Global runs the gamut Santos' list of potential criminal and regulatory investigations is a far cry from just three years ago, when Bermuda-based and Beverly Hills, CA-run Global Crossing was a Wall Street darling, hailed almost universally by the Street's top telecom analysts and investors. It's even further still from 1997, the year it opened for business with just some venture capital and a dream. Indeed, in a space of five years, Global Crossing has experienced higher highs and lower lows than many companies experience in decades. Santos says he has been involved in other corporate crises, but his experience at Global Crossing has been unique for one simple reason. "Every day is a crisis here," he says. "We've kind of gotten used to the fact that this is the way it's going to be. There's really been no respite here for nearly a year." Global Crossing was the brainchild of Winnick, a former Wall Street bond trader. His business concept was simple: Line the globe with state-of-the-art fiberoptic data-transmission lines. Winnick, like most everyone else in telecom during the late 1990s, figured that the explosive growth of internet data traffic would quickly manifest itself in an insatiable demand for "broadband" lines the world over. Nevertheless, despite the tremendous leap in internet traffic in recent years, the telecommunications industry drastically overestimated the ultimate demand for such broadband infrastructure. However, in the years before that lack of demand became apparent, Global Crossing's stock soared. At one point in 2000, Wall Street valued the company at about $48 billion, even though Global Crossing had never turned a profit. Yet, because most of the overbuilding was done with borrowed money, much of the industry was plunged into bankruptcy as a result of its colossal miscalculation. Global Crossing was no exception. In early 2002, the company filed for what was then the fourth-largest bankruptcy ever. Just three months ahead of the Chapter 11 filing, former AT&T executive John Legere was named CEO. Legere brought with him a new PR team headed by Santos. "I don't think we really understood the extent of the financial difficulties until we got here," says Santos. "I knew that the company was struggling, but I didn't realize how dire things actually were." Beyond its financial straits, Santos says that when he arrived he found a company with a skeletal PR operation. Most of the company's media relations work had been farmed out to its firms. However, he knew that with a potential bankruptcy filing looming, he needed to develop a strong in-house team. Yet the company's PR challenges did not stop with an abject business failure. Abundance of allegations There was a steady stream of allegations and negative stories about the company subsequent to its filing. Indeed, if 2002 did not have Enron, Tyco, and WorldCom, Global Crossing might have vied for the biggest business story of the year. Among the most serious allegations was that Global Crossing used aggressive and misleading accounting methods to distort its true financial condition, even as management realized that its business plan was unraveling. The allegations looked especially damming considering that Winnick cashed (now worthless) Global Crossing shares worth more than $700 million before the company went bankrupt. Other allegations surfaced in 2002 as well. Among them were document shredding, an unusually cozy relationship between management and disgraced Wall Street analyst Jack Grubman, and allegations that Winnick's sister improperly promoted shares of the company while working as a stock broker for Merrill Lynch - and those are merely the highlights. "Job one was to gather a team," says Santos. "We got some very strong people on board very quickly." The company then divided the PR responsibilities among four lieutenants, each given his or her own area of concentration: international communications, direct marketing relations, employee and executive communications, and media relations. Santos' goal was to create a crisis-type agency within the company. Although Santos says he briefly worked with some unnamed crisis firms along the way, he claims those relationships were short-lived. "They really didn't add anything too special to the equation," says Santos. "It took a while to get them up to speed, and it's just never seemed to benefit us in the end." Nevertheless, as the business pages printed a fusillade of stories insinuating impropriety, Santos says his team decided early on that it would always face the onslaught head on. "Our philosophy was always that no matter what, we'd be out there communicating," says Santos. "A lot of companies, when they get into this type of trouble, look to run and hide. They stop answering the phone and basically try to disappear. We did just the opposite." The rapid-fire revelations and media charges translated into a nonstop communications effort. This often meant several employee meetings a month, as well as making Legere available for public comment even when it might be easier for him to remain out of sight. "We decided that day by day - even hour by hour - we were going to tell employees, the media, and customers exactly what was happening," says Santos. "So in terms of our work, it's been relentless. But we knew that we could not be seen as ducking. That would just give the impression that we as a company might be going away - and we're dedicated to the idea of making people know that we're not going anywhere." Proactive approach with the media Santos and his staff say they have gone out of their way to make sure they maintain good relations with the press, and not letting that relationship devolve into an adversarial one has been a cornerstone of their strategy. "On the day of our bankruptcy filing, we called all of the reporters that cover us to tell them about it personally," says Becky Yeamans, VP of media relations. "So not only are we not hiding, we are often the ones letting them know. It gives us an opportunity to make sure that it's the facts that are written about." Currently, the company is hoping to emerge from bankruptcy in early 2003, and it has actually been on the PR offensive in recent months, pitching print stories and television segments tied to its comeback. But does Santos worry that any story the company lands will be rife with paragraphs that rehash the company's murky past? His answer is quick: "No, because when we started, all the paragraphs were bad. Now those graphs are becoming fewer and fewer. A lot of our early coverage focused on whether we'd ever emerge from Chapter 11, and now the tone has changed. Some of our coverage recently has even mentioned how formidable we'll be when we do emerge from bankruptcy. I think that alone shows we've come a long way." -------- PR contacts SVP, communications Jerry Santos VP, international communications Kevin Burgoyne VP, media relations Becky Yeamans VP, employee and executive Dan Coulter Director, marketing communications Khurram Mirza Total communications staff 38 Outside agency Bailiwick

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