Lovell & Stewart Announces Securities Fraud Class Action Against Global Crossing Ltd., Certain Officers and Directors, Investment Banks

Business Wire, August 15, 2001

Business Editors & Legal Writers

NEW YORK--(BUSINESS WIRE)--Aug. 15, 2001

The law firm of Lovell & Stewart, LLP ((212) 608-1900 or www.lovellstewart.com) filed a class action lawsuit on August 15, 2001 on behalf of all persons and entities who acquired the common stock of Global Crossing Ltd. (NYSE:GX) between August 13, 1998 and December 6, 2000, inclusive. The lawsuit asserts claims under Section 11, 12 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder and seeks to recover damages. Any member of the class may move the Court to be named lead plaintiff. If you wish to serve as lead plaintiff, you must move the Court no later than September 25, 2001.

The action, Jacob v. Global Crossing Ltd., et al., is pending in the U.S. District Court for the Southern District of New York (500 Pearl Street, New York, New York), Docket No. 01-CV-7619 (SAS) and has been assigned to the Hon. Shira A. Scheindlin, U.S. District Judge. The complaint alleges that Global Crossing and certain of its officers and directors violated the federal securities laws by issuing and selling Global Crossing common stock pursuant to the initial public offering without disclosing to investors that at least seven of the underwriters of the Global Crossing IPO had solicited and received excessive and undisclosed commissions from certain investors.

In exchange for the excessive commissions, the complaint alleges, co-lead underwriters Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Goldman Sachs & Co., and Morgan Stanley & Co. and underwriters Bear, Stearns & Co., Inc., Credit Suisse First Boston Corp. and Lehman Brothers, Inc. allocated Global Crossing shares to customers at the IPO price of $19.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $19.00, the defendant underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of Global Crossing stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive Global Crossing's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the defendant underwriters and their customers to reap enormous profits by buying Global Crossing stock at the $19.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $26.81 during its first day of trading.

Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the defendant underwriters required their customers to "kick back" some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation.

The complaint further alleges that defendants violated the Securities Act of 1933 because the Prospectus distributed to investors and the Registration Statement filed with the SEC in order to gain regulatory approval for the Global Crossing offering contained material misstatements regarding the commissions that the underwriters would derive from the IPO and failed to disclose the additional commissions and "laddering" scheme discussed above.

Christopher Lovell, the senior partner at Lovell & Stewart, has been appointed lead counsel or co-lead counsel in numerous significant class actions, including actions involving reportedly the largest class action recoveries in history under three separate federal statutes (the Sherman Antitrust Act, the Commodity Exchange Act, and the Investment Company Act of 1940). These record-breaking recoveries for class plaintiffs included the $1.027 billion recovery in In re: NASDAQ Market-Makers Antitrust Litigation and a $145.35 million recovery in 1999 in In re: Sumitomo Copper Litigation, a class action against various parties who conspired to manipulate the worldwide copper and copper futures markets for their own profit.

Investors who acquired Global Crossing common stock during the period August 13, 1998 through December 6, 2000, inclusive may contact Lovell & Stewart at the telephone number, address or E-mail address below for more information regarding the class action lawsuit. Investors can also visit Lovell & Stewart's website at www.lovellstewart.com to view a copy of the complaint.