Conscience had Qwest exec in a lock
By Al Lewis, Staff Columnist
Friday, March 23, 2007
What kind of company was Qwest under Joe Nacchio?
It was the kind of company where the senior vice president of
investor relations improperly cashed personal stock options.
On Wednesday and Thursday, Qwest's former IR guy Lee Wolfe
testified against Qwest's former CEO, who is on trial in federal
court on 42 counts of illegal insider stock trading. Wolfe
admitted trading indiscretions.
While head of Qwest's investor-relations department, Wolfe made
more than $1.6 million selling stock options in 2000 and 2001.
Some of those trades, he told the court, were possibly illegal.
"I knew keep down that I had material information," Wolfe told
the court. "I knew it was wrong. ... I had a crisis of
conscience that I should not do that anymore." Prosecutors may
have contributed to Wolfe's crisis. "I was concerned about
being prosecuted," Wolfe said. "I could go to jail. ... It
could be a long while."
"I think he's scared," said Anthony Accetta, a former federal
prosecutor watching the trial as a consultant to The Denver
Post. "He's doing everything he can to get out of jail, but
that doesn't mean he's lying."
"This is what good prosecutions are made of. The best way to
prove a criminal case is to get people to say, 'Yeah, I did it,
and so did he."
Until joining Qwest in 1997, Wolfe worked at AT&T for 33 years.
There he met Nacchio, who brought him to Qwest after its initial
public stock offering. The transition to a fast-moving telecom
startup must have been difficult.
"He was more of an old-economy AT&T guy than a new-economy Qwest
guy," said Tom Friedberg, a Denver-based analyst who covered
Like Nacchio, Wolfe lived in New Jersey and often commuted to
Colorado with Nacchio on the corporate jet. His job involved
taking calls from stock analysts and institutional investors,
and setting up "road shows," or meetings where Nacchio and other
Qwest executives could talk up Qwest's stock price.
Wolfe said he usually reported directly to Nacchio and that it
was always Nacchio's decision what to tell investors about the
"We relocated (corporate offices) three times," Wolfe said.
"Mr. Nacchio always made sure I was on the executive floor."
"There were three things Lee Wolfe seemed devoted to," said
Friedberg. "His family, Joe Nacchio and going to watch the Big
Ten wrestling match every year. And not necessarily in that
Friedberg said he often saw Wolfe reading wrestling magazines --
not fake wrestling, the real sport.
But no matter how many articles he'd read on wrestling, Wolfe
was always getting pinned at the office. First, the analysts
and investors would beat him up over the phone. Then Nacchio
would do the same after Wolfe relayed the analysts' concerns to
"He was scolding me for allowing the analysts to lower their
recommendations," Wolfe testified of Nacchio.
As if Wolfe had control over what an analyst decided to write as
the company's stock continued to falter.
The outlook was golden
When Qwest merged with US West in 2000, Nacchio promised
investors that revenue would grow 15 to 17 percent a year
through 2005. Nacchio would not back away from those
projections, even as the economy slipped and major
telecommunications companies lowered their projections, because
it would mean a drop in the stock, Wolfe said.
It was Wolfe's job to deal with influential Wall Street analysts
who demanded to know how Nacchio planned to achieve this amazing
Wolfe said he knew Nacchio was padding the results with
"one-time" transactions, such as sales of telecom capacity to
other companies, and not recurring business. But he could never
say as much.
That's because one of Wolfe's contributions to Qwest was the
"The Golden Rule is, you never said anything that would make the
stock price go down," Wolfe said.
Wolfe said he didn't invent this rule: Nacchio did. "That was
his attitude," he said. "I named it the Golden Rule."
Wolfe said Nacchio frequently cited this rule -- which was
golden for anyone dumping their Qwest stock while it was hot.
When Qwest stock took a tumble after the company began to
publicly acknowledge its problems, Nacchio cited it again, Wolfe
told the court.
"He said: 'See, this is what happens when you disclose.' "
Al Lewis' column appears Sundays, Tuesdays and Fridays.
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