AUSWR
The Association of U S West Retirees
 

 

 

Ex-VP likely not key witness
Weisberg may testify about Qwest culture at Nacchio's trial
By Jeff Smith, Rocky Mountain News
Friday, December 30, 2005

Former Qwest senior executive Marc Weisberg may be useful to federal prosecutors with his general knowledge of how the Denver telco was doing in 2001 and of the pressure former CEO Joe Nacchio exerted on employees to meet his expectations, according to sources familiar with the case.  But Weisberg isn't expected to be a critical witness on specific transactions or to possess a "smoking gun" against Nacchio.  Instead, potential key witnesses in the government's insider trading case against Nacchio are expected to include former Chief Financial Officer Robin Szeliga, former President Afshin Mohebbi and former top sales executive Gregory Casey.

Weisberg, Qwest's former executive vice president of corporate development, pleaded guilty Wednesday to one felony count of wire fraud in connection with a vendor stock case and agreed to cooperate with the government.

Another indication that Weisberg's possible testimony isn't deemed essential is that the government hasn't made a move to delay his March 3, 2006, sentencing date until after Nacchio's trial to be sure of his cooperation.  Under the proposed plea agreement, subject to court approval, Weisberg would receive two years of probation, including two months of house arrest, instead of jail time.

Nacchio was indicted on 42 insider trading charges last week in connection with selling more than $100 million of Qwest stock in the first five months of 2001.  Nacchio is accused of selling his stock at a time when he knew the telco wasn't doing nearly as well as portrayed to investors.  His trial date hasn't been set.

Weisberg, a former investment banker and certified public accountant, was considered one of Nacchio's top senior executives during his tenure at Qwest from 1997 to 2001.  He managed Qwest's corporate investments and was involved in mergers and acquisitions, including the U S West deal, which closed in mid-2000.

But the relationship between Nacchio and some senior executives appeared to grow tense in 2001 as Qwest struggled to meet its financial targets and integrate what Nacchio considered to be the plodding, bureaucratic culture of U S West, a local phone monopoly, with the fast-moving culture of Qwest, a nationwide fiber-optic company.

"It was simply cultural warfare, red state vs. blue state," said Tom Friedberg, a Denver telecommunications analyst at the time and a former U S West employee.  "Time and service (U S West employees) resented youth and talent, and youth and talent had no respect for time and service."

With Nacchio's pre-merger senior executive team cashing out tens of millions of dollars of stock options, they no longer had a financial incentive to work long hours.

Nacchio "didn't have the help of his senior lieutenants," Friedberg said.

When Weisberg and Lew Wilks, chief strategy officer, left in fall 2001 on the heels of three other key departures, some analysts expressed concern about Qwest's management depth.

Nacchio bristled.  At a Goldman Sachs investment conference in New York in early October 2001, Nacchio blamed the management departures on an infirmity he described as "they all got very rich."

"I've learned a lot of times that (when this happens), they don't listen to you anymore," Nacchio said.  They "would rather buy a house in the Cayman Islands or Hawaii."

While Nacchio didn't mention anyone by name, Weisberg was the one who had bought a vacation home in the Cayman Islands.  Weisberg was said to be upset by Nacchio's remarks.

Weisberg had made $29 million in stock profits by the time he left Qwest, according to a Rocky Mountain News analysis based on Vickers Stock Research data.  Weisberg sold stock between February 1999 and January 2001, with January accounting for about 25 percent of his sales.

While that overlaps slightly with Nacchio's alleged insider trading period, Weisberg wasn't a target in that case.  Weisberg was indicted in a separate case last February, alleging that he took advantage of his position to pressure vendors to steer low-priced stock to him.

If Weisberg testifies in the Nacchio case, it may be more on the order of a general characterization of Qwest's culture, similar to Szeliga's testimony in the 2004 trial of four former midlevel Qwest executives.

Szeliga testified in that trial that Qwest was a "pressure cooker" and "chaotic" and that Nacchio expected better financial results than Qwest's business units believed they could achieve.

http://rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_4350796,00.html