Winnick Suffers Setback In Suit by Former Partner

By Amanda Bronstad
(Los Angeles Business Journal)

Gary Winnick, who has so far successfully averted claims made by shareholders of the bankrupt Global Crossing Ltd., suffered a legal setback last month in a $1.1 billion case brought by a former partner.

An Aug. 28 ruling by a three-judge panel in the 2nd Appellate District paves the way for Douglas Shooker’s fraud case against Winnick to head to trial on Sept. 19 in Los Angeles Superior Court. An expected appeal by Winnick of the decision to the California Supreme Court could delay the trial.

Shooker was managing director of Winnick’s Pacific Capital Group Inc. in 1993. Under a partnership agreement, he was to receive a 15 percent interest in various ventures, including Telecommunications Development Corp., a precursor to Global Crossing, according to the ruling.

Shooker left Pacific Capital in 1994. But in August 2000, after reading about Winnick’s plans for Global Crossing, he sued in L.A. Superior Court for breach of fiduciary duty, fraud and other claims, seeking the 15 percent owed him from the partnership agreement, the ruling says.

Shooker planned to, designate himself an expert witness but withdrew in March after the lower court judge forced him to disclose communications with his lawyer that are typically considered confidential, the ruling says. Shooker petitioned the appellate court to retain his attorney-client privilege in the case, and the panel ruled in his favor.

Winnick’s lawyer, Marshall Grossman, a partner at Alshuler Grossman Stein & Kahan LLP, said he would seek a review of the ruling by the state Supreme Court.

"Once you waive the privilege, you don’t get a mulligan," he said. The waiver is complete. "He has played games with the rules, and we intend to hold his feet to the fire and deal with the consequences of designating himself as an expert."

Don Howarth, a partner at Howarth & Smith representing Shooker, called the attorney-client privilege issue a "sideshow" Winnick used to divert the case before trial.

He said Shooker intends to take the stand as a fact witness but offering no expert opinion in the case.

Global Crossing shareholders, along with former employees and bondholders of the company, are expected to reach a wide ranging settlement with the company and Winnick this fall covering a number of suits.