AUSWR
The Association of U S West Retirees
 

 

 

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 insider trading.

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 shareholders.

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, to $5.56.

"It's been terribly sad for many people," said Susan Woodworth, president of the Telephone Retiree Association of Arizona.

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.

http://www.azcentral.com/arizonarepublic/business/articles/1221nacchioreax21.html