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IN RE GLOBAL CROSSING

March 31, 2004.

In re GLOBAL CROSSING, LTD. SECURITIES LITIGATION; ROY L. OLOFSON, Plaintiff -V- GARY WINNICK, et al. Defendants


The opinion of the court was delivered by: GERARD E. LYNCH, District Judge

OPINION AND ORDER

This case, originally brought in California state court and later removed and consolidated with the class action complaint in In re Global Crossing Ltd. Securities Litigation, arises from alleged accounting improprieties at the telecommunications firm Global Crossing, Ltd. ("GC"). Plaintiff Roy Olofson, who served during the time relevant to the complaint as Vice-President of Finance for Global Crossing Development Company ("GCDC"), a subsidiary of GC, claims he was wrongfully terminated in retribution for raising concerns about "swap" transactions allegedly Page 2 used by company management to inflate the company's stock price. Plaintiff asserts claims under California law for intentional and negligent interference with contract and intentional and negligent interference with prospective economic advantage against Gary Winnick, the Chair of GC's board, and various of its officers and directors. He further brings a claim for defamation against Winnick. Defendants move to dismiss the complaint. For the reasons discussed below, defendants' motions to dismiss plaintiffs claims for interference with contract and economic advantage will be granted, and the motion to dismiss plaintiffs defamation claim will be denied.

  BACKGROUND

  The facts as presented in the complaint, which must be taken as true for purposes of this motion, are as follows.

  Olofson served as Vice-President of Finance for GCDC from May 1998 until November 2001. In May 2000, defendant Joseph P. Perrone was hired as Senior Vice President of Finance, and was soon promoted to Executive Vice-President of Finance of GC, at which time he took over responsibility for GC's accounting and reporting requirements from Olofson. At around this time, Olofson became concerned about GC's increasing use of "swap" transactions, or transactions in which GC would sell capacity on its network to other telecommunications providers, but would "roundtrip" the proceeds by engaging in mirror-image purchases from those providers, with each booking the proceeds from the transaction as revenue.*fn1 These transactions were entered into at the end of the financial quarter, Olofson believed GC's accounting for these transactions violated Generally Accepted Accounting Principles ("GAAP") and that they had no Page 3 valid business purpose, but rather were entered into solely to create the appearance that GC's revenues met Wall Street's expectations. He was further concerned that defendant Thomas Casey, GC's Chief Executive Officer, had falsely told analysts that there had been no swap transactions in the first quarter of 2001.

  Olofson first raised these concerns with Perrone in meetings on May 31 and June 1, 2001. At the June 1 meeting, Perrone "brushed off [Olofson's] concerns," and angrily informed him that he was in danger of being laid off. Olofson contacted defendant Dan Cohrs, GC's Chief Financial Officer, after the meeting to ask whether he would be laid off; Cohrs responded that he should contact Perrone after July 6. When Olofson attempted to do so, Perrone did not return his calls. Thereafter, Olofson "was given no work and was essentially cut off from any meaningful participation in the affairs of Global Crossing Ltd. or Global Crossing Development Company." (¶ 30.) On August 6, 2001, Olofson complained to GC's Chief Ethics Officer, James Gorton. Gorton responded the next day, assuring plaintiff that GC took seriously the issues he had raised.

  Olofson alleges that the decision to fire him was initially made in July or August 2001, but was "shelved" in response to his letter of August 6. On August 15, Gorton notified him that GC had begun an investigation into the practices he had identified, and simultaneously demanded that he formally notify GCDC whether or not he would continue his employment at the company. GC did not, however, provide any assurance that it "was actually going to investigate, let alone change any of its accounting practices." (¶ 63.) Olofson then "formally notified defendants that he would not participate in and/or have any complicity in a continuation of the conduct described in the August 6, 2001 letter." (¶ 64.) He was subsequently placed on paid administrative leave, and was fired shortly thereafter, purportedly as part of a "planned reduction in force." (Id.) Page 4

  Olofson alleges that he was not only terminated but also defamed as a result of his attempts to seek an investigation: at a "town hall" meeting for GC employees on February 15, 2002, following GC's bankruptcy filing, Winnick publicly stated that "[t]he definition of an extortionist is Roy Olofson."

  GC declared bankruptcy in early 2002. Unable to sue GC, Olofson now asserts claims against individual defendants Winnick, Perrone, Cohrs, and Casey for intentional and negligent interference with contract and intentional and negligent interference with prospective economic advantage, arising from his firing by GCDC. He further asserts a defamation claim against Winnick for the statement made at the February 15, 2002, town hall meeting. Defendants move to dismiss all claims.

  DISCUSSION

 I. Standard of Review

  A. Standard for Dismissal

  On a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court must accept "as true the facts alleged in the complaint," Jackson Nat'l Life Ins. Co. v. Merrill. Lynch & Co., 32 F.3d 697, 699-700 (2d Cir. 1994), and may grant the motion only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Thomas v. City of New York 143 F.3d 31, 36 (2d Cir. 1998) (citations omitted); see also Bernheim v. Litt, 79 F.3d 318,321 (2d Cir. 1996) (whoa adjudicating motion to dismiss under Fed.R.Civ.P. 12(b)(6), the "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims" (internal quotation marks and citations omitted)). When deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court may Page 5 consider documents attached to the complaint as exhibits or incorporated in it by reference. Brass v. American Film Techs., Inc., 987 F.2d ...


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