Nacchio trial pleases Qwest veterans
Joseph Nacchio's nine-figure payday still stings Qwest
employees, whose retirement accounts took a hit. They'll be
watching the former CEO's trial closely.
By Neal St. Anthony
Minneapolis Star Tribune
Friday, January 13, 2006
You sure can't blame Qwest retirees Marlyn Beaudine of St.
Cloud and Arnie Albrecht of suburban St. Paul and thousands
of others retirees and employees for smirking a bit
recently. Their one-time boss, former Qwest CEO Joseph
Nacchio, the guy who bagged $101 million in 2001 from the
sale of Qwest stock, was indicted last month on 42 counts by
federal prosecutors who allege that Nacchio cheated and lied
on his way to that nine-figure gain. According to
high-ranking subordinates set to testify against him,
Nacchio ordered inflated revenue and earnings as he quietly
sold his own stock ahead of the news that the telephone
company was failing amid the telecommunications bust. Qwest
stock fell from a high of $64.50 to a low of $1.24. Under
new leadership, the stock has clawed its way back above $5.
"I'm glad that the justice system is moving forward with
him," said Albrecht, a 38-year Qwest veteran.
"With about $3 billion in revenue booked incorrectly,
obviously somebody was badly mistaken or crooked," he said.
"He was the top guy. He was responsible, whether he did it
personally or created a pressure culture on subordinates to
meet his objectives," Albrecht said.
Unfortunately, he said, Nacchio's prosecution won't do
anything for the thousands who had part of their 401(k)
funds invested in Qwest stock.
"The company match was always in Qwest stock," he said.
Nacchio, 56, who led the Denver-based company that provides
telephone and related services to Minnesota and 13 other
states, pleaded not guilty and was led away in handcuffs.
He's free on $2 million bond.
A trial date is expected to be set for later this year.
Nacchio's lawyers are expected to argue beginning this month
that they might need months to a year or more to prepare a
complicated defense for a guy who might even invoke national
security considerations as part of his case. Nacchio, who
once served on a President Bush-appointed telecommunications
advisory panel, has indicated that he possessed secret
information that made him optimistic about Qwest's
government business prospects.
The government's witnesses will include a number of former
Qwest executives with another allegation: Nacchio was a
panicked bully for whom they inflated the numbers.
Get ready for a donnybrook. The Nacchio trial will be the
latest among the three-ring corruption trials that already
have claimed the bigshots at WorldCom and Tyco.
Still ahead: the mother of all white-collar prosecutions:
the two top guys at the former Enron, which has become the
national proxy for short-term greed and executive
Christopher Cox, the former Republican congressman who now
chairs the Securities and Exchange Commission, said recently
that there has been public benefit in terms of better
disclosure and more accountability as a result of the
Sarbanes-Oxley Act of 2002, hurriedly passed in the wake of
the corporate scandals that shook investor confidence in a
swooning stock market.
"With just a few years of Sarbanes-Oxley under their belts,"
Cox said recently, "most companies are begrudgingly
admitting that the exercise has produced benefits."
However, the compliance-and-auditing portions of the law are
costing billions of dollars annually in what many firms,
particularly small public companies, have complained are
Some of that might get rolled back under recommendations
made last month by a Sarbanes-Oxley review commission headed
by Janet Dolan, the just-retired CEO of Tennant Co., who,
like other responsible executives, wants the stepped-up
corporate governance and executive-accountability provisions
Investors, including some of the country's most
sophisticated asset managers, still complain that they often
can't figure out how much the top dogs at some public
companies are getting paid.
Cox wants more transparency. SEC commissioners took a big
step in the right direction this week by proposing rules to
require big companies to uniformly disclose more about top
executive compensation, including perquisites, retirement
benefits and a total-compensation figure.
This is good. Investors should at least know what they're
paying for the performance they're getting.
Neal St. Anthony •