Retirees, union head applaud indictment
By Max Jarman
The Arizona Republic
Wednesday, December 21, 2005
"There is a God."
Those were the first words U S West retiree Susan Olson
heard when a friend called Tuesday to tell her that former
Qwest chief Joe Nacchio had been indicted on 42 counts of
They are the first criminal charges against Nacchio in the
federal government's almost 4-year-old investigation into
accounting practices at Denver-based Qwest Communications
International. Broadband provider Qwest bought Baby Bell U
S West in 2000. Nacchio already faces civil charges filed
by the U.S. Securities and Exchange Commission and Qwest
Qwest spokesman Chris Hardman said the company continues to
cooperate with the government's investigation but would not
comment further on the indictments.
News that Nacchio, 56, was in custody was music to the ears
of many Arizonans who blame him for lost jobs, retirement
woes and financial adversity.
"There are a lot of retirees who are feeling a sense of
vindication today," said Olson, who retired from U S West in
1998. "It won't bring anything back, but there is
satisfaction in knowing he won't get off scot-free."
Olson's health benefits have been cut, and she lost a
portion of her retirement savings while Nacchio was Qwest's
chief executive officer. Other retirees who had most of
their savings in U S West/Qwest stock lost practically
everything when the share price plunged from more than $50
to less than $2. Qwest shares closed down 12 cents Tuesday,
"It's been terribly sad for many people," said Susan
Woodworth, president of the Telephone Retiree Association of
Retirees weren't the only ones hurt. Thousands of workers
were laid off in cost-cutting moves, and more saw their
401(k) plans decimated when Qwest's share price tumbled.
"Nacchio was all about cutting costs and didn't care where
it came from," said Chris Rossie, who heads the
Communications Workers of America local 7019, Qwest's main
union in Arizona. "He was open to outsourcing any and all
work if it would cut costs. He didn't care about any
agreements he had with us."
Nacchio's business practices put Qwest at odds with
regulators. In 2001, then-Attorney General Janet Napolitano
sued Qwest, alleging deceptive, high-pressure sales
tactics. After Nacchio left the company in 2002, Qwest paid
the state $3.75 million to settle the suit.
"It was a pirate operation and turned a great company into a
fraudulent rip-off," state Attorney General Terry Goddard
said of Qwest under Nacchio's leadership. "Many consumers
got seriously hurt. I'm very pleased to see him finally
have to pay his dues."
Arizona Corporation Commissioner Bill Mundell also believes
Nacchio got what was coming.
"We had numerous problems with the Nacchio-led management at
Qwest," Mundell said. "They were anti-consumer,
anti-competitive and tried to circumvent our authority."
In 2004, the commission assessed $21 million in penalties
against Qwest for forming secret agreements with competitors
to gain long-distance approval. The panel also tangled with
Qwest over its refusal to comply with an order to lower
rates to competitors and for selling customer information to
third parties, among other things.
Mundell voted to approve Qwest's $36.5 billion acquisition
of U S West in 2000 and regrets his action. He believes
Qwest misled the commission and if the company had been
truthful, he never would have voted to approve the deal.
The government has alleged in both civil and criminal cases
that Qwest and some of its former executives participated in
a massive financial fraud from 1999 to 2002 that allowed
Qwest to improperly report approximately $3 billion in
sales. Qwest later restated earnings from 2000 and 2001 to
erase about $2.2 billion in revenue.
Reach the reporter at
max.jarman@arizonarepublic .com or (602) 444-7351.