Gary Winnick: If You've Got It, Spend It
In Los Angeles, a city known for extravagant spenders, Gary Winnick, the billionaire founder of telecom upstart Global Crossing Holdings Ltd., suddenly seems to have the fastest checkbook in town. In late August, Winnick, 52, agreed to pay what may be the highest price ever for a single-family home in the U.S., forking over $40 million to fellow mogul David H. Murdock for the old Hilton estate in Beverly Hills. In May, the Long Island (N.Y.) native gave $40 million to the Simon Wiesenthal Center to build a research facility and museum of tolerance in Jerusalem. Winnick insisted that world-renowned architect Frank O. Gehry design the building, which will be called the Winnick Institute.
He's hardly skimping when it comes to his business, either. Winnick is spending $9 million to renovate the former MCA building in Beverly Hills, which he bought in late 1998 with $41.5 million from his own bank account. The landmark 1938 structure will be leased to Global Crossing, as well as Winnick's Pacific Capital Group, a firm that invests in businesses ranging from telecoms to real estate. The building features a replica of the Oval Office, which Winnick now occupies. Meanwhile, in the nation's real capital, Global Crossing, its top executives, and several other employees have doled out more than $1.1 million to federal political campaigns this season. That earned the company the distinction of being California's top contributor.
At first glance, Winnick might resemble any other newly rich executive throwing money around. It's true that he accumulated much of his wealth quickly. Three years ago, he plunked down $15 million he earned through Pacific Capital investments in what was then just a promising idea: laying fiber-optic cable across the Atlantic to handle the increasing long-distance and data traffic moving between the continents. Today, his 11% stake in Global Crossing is valued at $2.7 billion. Plus he has plenty of cash on hand, since he has sold some $600 million worth of shares in the past two years. People who know Winnick, however, say he has always liked to live grandly, give generously to charity, and cut associates into his deals. It's just that now the living has become more grand, the philanthropy more generous, and the deals more sizable. As Winnick says, "money is no fun unless you spread it around."
EXUBERANCE. That pretty much sums up Winnick's route to success. Certainly that attitude has helped Winnick hold on to smart, ambitious employees, who could work for anyone. Nobody knows that better than Leo J. Hindrey, Global Crossing's chief executive. To persuade Hindrey, former head of AT&T's cable operations, to join Global Crossing last December, Winnick offered him a $1 million annual salary and bonus, plus options on 500,000 shares. Hindrey will also receive 5.5% of the appreciated value of an Internet hosting business Global Crossing recently sold to Exodus Communications Inc. His take over the next two years could hit $250 million.
In September, Winnick managed to poach Brian McCarthy, a top mergers-and-acquisitions lawyer and a onetime adviser to Global Crossing, from Skadden, Arps, Slate, Meagher & Flom. McCarthy accepted the position of general counsel at Pacific Capital after Winnick spent no less than three years courting him. Winnick even loaned McCarthy his private plane to fly from Los Angeles to Philadelphia when McCarthy's sister-in-law died suddenly.
Winnick's generosity has helped him create a network of financiers, executives, and former politicians who can bring him new deals. "There is a purpose to his spending," says Lodwrick M. Cook, co-chairman of Global Crossing and the former chief executive of Atlantic Richfield Co. "He enjoys life, and he has this personality that is exuberant. People are attracted to that. They want to be with a winner."
IMAGE BOOSTER. Winnick no doubt picked up some of his swagger from his first boss, former junk-bond king Michael Milken. For 13 years, Winnick worked as a bond trader and salesman with the man who never missed an opportunity to talk up a deal.
Like many successful salesmen, Winnick's spending is partly for show. A few years ago, he gave all of his senior executives gold cuff links in the shape of a telephone. He carries cigars but rarely smokes them. And his long-winded, profanity-laced conversations tend to include a fair amount of name-dropping.
At a speech he gave in May at the Simon Wiesenthal Center, Winnick said his spend-your-way-to-success approach was shaped by a television show he watched as a kid in the 1950s. The Millionaire featured a fictional donor whose gifts changed troubled people's lives. "I always imagined what it would be like to be the person who wrote that check and then gave it away," Winnick said then. But his family faced its own troubles. His father, who owned a food-service-equipment business, died after a heart attack when Winnick was 18. Winnick likes to say that his commitment to philanthropy at a relatively young age is a reflection of both those experiences. In other words, give while you can still decide where your money goes.
Indeed, Winnick and his wife, Karen, the author of several children's books including Mr. Lincoln's Whiskers, have over the years given millions to such organizations as the Special Olympics, Cedars-Sinai Health System in Los Angeles, and the Los Angeles Zoo. As altruistic as Winnick's charitable contributions may be, the philanthropy can't help but boost his business prospects. "Giving away money changes your image, internally and externally," says Todd Morgan, one of Winnick's money managers and the chairman of the Jewish Federation of Los Angeles, a fund-raising organization to which Winnick has contributed. "People feel comfortable doing business with you. [And] you feel as if you are creating wealth for a higher purpose. As a result, you tend to think bigger and broader, and it leads to greater success."
Nowhere is the Winnick approach more evident than at Global Crossing. Three years ago, at a time when Pacific Capital still had a relatively undistinguished record, Winnick and his four-member staff were kicking around telecom investment ideas. Winnick asked one of his associates, David L. Lee, a former executive at TRW Inc., to talk to AT&T about interesting business opportunities. Lee came back with the proposal to lay fiber-optic cable across the Atlantic.
Winnick was interested. In fact, he raised $750 million in a matter of months. Much of the money came from institutional investors such as CIBC Oppenheimer and Union Labor Life Insurance Co., firms he had invested with in the past. Winnick also decided to expand the fiber-optic lines globally and, in February of last year, to initiate an $11.2 billion merger with Frontier Corp., a Rochester (N.Y.) telecom company. That gave Global Crossing an extensive fiber network in the U.S. as well as an Internet-hosting business, which Exodus recently agreed to buy for $6.5 billion in stock. Global Crossing, which provides telephone and data services on a wholesale and retail basis to other carriers and to businesses, recently pushed up its estimates of 2000 revenues to more than $5 billion. It has emerged as both a credible challenge to and an attractive acquisition candidate for any of the world's big telecom firms, say Wall Street analysts.
INSTANT MILLIONAIRES. In typical style, Winnick handed out Global Crossing stock with abandon that first year. When the company went public in August, 1998, his secretary, personal trainer, and others became instant millionaires. "My housekeeper has a housekeeper now," he says. Winnick even fronted some $5 million for his associates at Pacific Capital, including Lee, and managing directors Barry Porter and Abbott Brown. They all became wealthy; Lee became a billionaire.
Winnick's spending isn't always so magnanimous, though. When Global Crossing faced a challenge to its Pacific expansion from an international consortium of telecom companies, it shelled out some $3 million to lobby the Federal Communications Commission. In the end, the consortium was forced to alter its proposal to win FCC approval.
These days, Winnick is looking for the next Global Crossing. In the spring, Winnick acquired a controlling interest in Colony Capital Inc., a real estate investment firm run by Thomas J. Barrack Jr. Winnick and Barrack plan to raise some $1 billion, largely from union-related pension funds, for what they call a labor-friendly leveraged buyout fund. They want to buy service and industrial companies and turn them around--without laying off workers or tossing out unions.
Winnick is also building up his own investment firm, Pacific Capital. The staff recently was doubled, to nine full-time managing directors. Among those brought on board as an adviser is former California Governor Pete Wilson. "Winnick will see the best deals and leverage his contacts," says James H. Zukin, an investment banker whose Los Angeles firm, Houlihan Lokey Howard & Zukin, has worked with Pacific Capital. Doesn't Winnick know it. All that generosity should pay off sooner or later.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.