Pentagon Pal Perle Gets GX Paycheck

Global Crossing hired Defense Policy Board chairman Richard Perle to guide it through its regulatory problems

March 24, 2003

4 Min Read
Pentagon Pal Perle Gets GX Paycheck

Global Crossing Holdings Ltd. may be struggling to get past regulatory hurdles and bankruptcy, but the carrier also has some friends in some very high places ready to help get it out of the fix.

Adding to the list of heavyweight lobbyists and advisors already on its payroll, Global Crossing recently retained Defense Policy Board chairman (and Donald Rumsfeld friend) Richard Perle. He is, according to a company spokesperson, providing advice on how to convince the U.S. Department of Defense to take down the national security barricades blocking a buyout that could enable the carrier to emerge from Chapter 11.

“Richard Perle is providing guidance to help us through the regulatory approval process in Washington, D.C.,” says a Global Crossing spokesperson. “His policy expertise and advice is highly valued in advising Global Crossing on the various areas of public interest that impact the regulatory approval process in the U.S.”

According to a source close to the company, Global Crossing is paying Perle a total of $725,000. That sum includes a $600,000 bonus if the government approves the Hutchison-STT deal.

Global Crossing is seeking government approval of the sale of the company to Hong Kong-based Hutchison Whampoa Ltd. (Hong Kong: 0013)and Singapore Technologies Telemedia Pte. Ltd. (STT). A bankruptcy court judge approved the Asia duo’s $250 million bid for a 61.5 percent stake in the carrier last year, but the carrier still needs the blessing of the Federal Communications Commission (FCC) and the U.S. Treasury’s Committee on Foreign Investment in the United States (CFIUS) (see Court OKs GlobalX Reorg Plan). While the FCC is expected to approve the plan soon, the CFIUS very likely won’t. With opposition to the plan from the Defense Department, the Pentagon, and the Federal Bureau of Investigation (FBI) , which claim that placing Global Crossing’s 20,000-mile fiber-optic network under Chinese ownership could present a national security risk, some observers speculate that the Committee could block the sale altogether.

Others, however, think CFIUS will let the deal go through, but with several limitations, including requiring the carrier to give up some, if not all, of the contracts it holds with the U.S. government. “They may have government contracts that have to be abandoned,” says Frank Dzubeck of Communications Network Architects. “You often see compromises like that taking place… I think it will go through with modifications.”

Global Crossing has reportedly offered to place sensitive parts of its network under the control of a committee with national security clearance. No matter what concessions it makes, the carrier doesn’t seem to expect the issue to be resolved anytime soon. According to reports, the company appealed for an extension to its March 31 deadline for approval. Global Crossing wouldn’t comment on the matter beyond stating that it continues to cooperate with regulators.

While Global Crossing is keeping its fingers crossed in hopes that its new lobbying efforts will pay off, others are hoping they won’t. Last month, New Jersey telecom group IDT Corp. made a rival $255 million bid for the carrier, insisting that the close link between Hutchison founder Li Ka-Shing with Beijing poses a serious security threat. Global Crossing’s creditors, however, reaffirmed their commitment to the Hutchison-STT deal earlier this month.

In view of Perle’s substantial influence over policy decisions, a regulatory blessing could be closer than some observers expect.

Global Crossing already engages lobbyists Covington & Burling and Skadden, Arps, Slate, Meagher & Flom, LLP & Affiliates and has hired former secretary of state Henry Kissinger -- through his law firm, Kissinger McLarty Associates -- as an advisor, according to Global Crossing’s bankruptcy filings.

But while the above certainly have significant clout, they can’t touch Perle on influence with the current government. For someone who, among other things, has been credited with helping form the policy that today has bombs pulverizing Baghdad, getting the DOD to go along with a small business deal should be a piece of cake.

Global Crossing insists that there is nothing out of the ordinary in engaging someone of Perle’s stature to help it through the regulatory process. “It is common practice to engage expert legal counsel and regulatory advisors to provide guidance in matters involving government approvals,” the company spokesperson says.

— Eugénie Larson, Reporter, Light Reading

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