Workers, retirees say Nacchio sentence fits
By Virgil Larson, Staff Writer
Friday, August 3, 2007
Judy Weis watched two momentous days in Joe Nacchio's life on
The first was when Nacchio, as chief executive of Qwest
Communications, appeared before his newest employees, those who
worked for U S West Communications when it was acquired seven
years ago this summer.
A former AT&T executive often described as arrogant, brazen and
cocky (he reportedly said the U S West executives he inherited
were "clowns"), he staged an employee rally at Denver's Pepsi
Center and transmitted it to gatherings around the phone
company's 14-state territory.
Weis, a veteran of U S West and its predecessor Northwestern
Bell Telephone Co., watched in Omaha.
The last time she saw Nacchio was a week ago today. She was in
the federal courthouse in Denver when he was sentenced to six
years in prison for insider trading — selling his Qwest stock
when he knew the company was in trouble even as he told the
public everything was great.
The courtroom was full, so Weis, who retired from Qwest in 2004,
and her husband, Qwest employee Ken Weis, watched from a room a
few floors away.
"That was quite a different scene last Friday when the judge
refused him the pulpit, so to speak," Judy Weis said. "He
wasn't allowed to speak. It was a different Nacchio."
Between Nacchio's triumphant performance in the Pepsi Center and
his sentencing, Judy Weis and thousands of other employees and
retirees of Qwest, U S West and Northwestern Bell saw long-held
nest eggs of company stock wither. A stock that closed at
nearly $60 a share shortly after Qwest acquired U S West fell to
$1.11 in two years.
"I had some stock options that were worthless," Judy Weis said.
She declined to say how much company stock and options she had
Qwest employees and retirees interviewed generally said that
Nacchio, who was forced out as CEO in 2002, got what he
deserved: prison time.
"He was the captain of the ship. He was the one who not only
set the standard but directed the action," said Nelson Phelps,
who, as executive director of the Association of U S West
Retirees, has dealt with — and clashed with — a succession of
CEOs over retiree pensions, life insurance and health benefits.
"He called the shots. You can see that in the testimony of his
underlings," said Phelps, a retired U S West manager who lives
in Aurora, Colo. "You either did it or you were gone. He
didn't take no for an answer, especially on (financial)
Stock in regional phone companies, like U S West, that were spun
off as independent companies when the government broke up AT&T
in the mid-1980s was considered as reliable as that of Ma Bell
itself. Retirees hung onto the stock, Phelps said, and the nose
dive it took under Qwest was the cause of a lot of anger.
But the anger at Nacchio was more complex, he said. Employees
of Mountain Bell, another predecessor of U S West, were proud of
their company and felt they were respected because of their
employer, he said.
"Qwest was a dirty word," Phelps said. "I know retirees who
would lie when people asked them who they worked for."
Hazel Floyd of Denver, a Mountain Bell and U S West employee for
more than 30 years before retiring, was in the courtroom as
Nacchio was sentenced. She sat behind Nacchio's wife and son.
Nacchio was "so arrogant at stockholder meetings," Floyd said.
"Most retirees feel that he ruined the company. A lot of them
had all their money in stock. Some of them had to go back to
work with other jobs. I lost a lot of money."
Jim Burns, a U S West retiree in Omaha, said many retirees
suffered when the stock price collapsed.
Some of those who purchased shares in a three-year period
beginning in July 1999 will recover a portion of their losses in
the settlement of several lawsuits. The Securities and Exchange
Commission is administering a payout of $267 million to retirees
and others who bought the stock then.
"It'll be pennies on the dollar," Burns said.
Many retirees kept their stock because Nacchio reassured them
that everything was all right, he said.
Burns said that he lost money but that it wasn't a sizable part
of his investments.
He said it wasn't that he saw what Nacchio was doing. Rather,
he just believed in diversifying his investments.
Of Judge Edward Nottingham's sentence of six years in prison and
$70 million in fines and reimbursements, Burns said, "I was
satisfied that it was a good, stiff sentence. I think it's good
seeing white-collar crime punished."
Tom Burns, another Omaha retiree, and Jim Burns (they are not
related) meet other retirees for coffee every Monday morning.
This week, Tom Burns said, Nacchio's sentencing was the first
topic of conversation.
"The reaction was pretty much the same as mine," he said. "We
felt, if anything, the time in jail might have been a little
light. But the fines and what he has to pay back seem pretty
Tom Burns was a union employee until retiring from the
five-state Northwestern Bell Telephone Co., based in Omaha, just
before the breakup of AT&T. Then he went to work as a full-time
union representative for the Communications Workers of America,
retiring from that job in 1994.
Union members held company stock, he said, especially in the
later years when 401(k) retirement accounts were made
available. The company's 401(k) match was in company stock, and
many employees bought Qwest stock with their own contributions,
"That's where people took the loss. They didn't diversify."
"When you went to work you felt you had a lifetime-secure job,"
Tom Burns said. "You felt loyal to the company and it was fine
to leave money invested with them, that they were taking good
care of you."
He recalled a chief operator in North Dakota during his early
days with Northwestern Bell, a time before 401(k) accounts but
when employees could buy company stock at a discount.
"The chief operator wanted to accumulate enough stock that she
would have dividends paying her equal to what her wage was.
That was her objective.
"She was alive when the company stopped paying dividends on the
shares when Nacchio came in. I often wonder what happened to
her and what her feelings were about it at that point in her
None of those interviewed could think of anybody who thought
well of Nacchio, even from his first days after he engineered
the acquisition in June 2000 of U S West by the upstart
fiber-optic network builder he was running.
A traditional phone company with a predictable stream of
revenue, U S West provided 80 percent of the revenue of the
combined company in 2002.
"I don't think there was anybody really close to him," Tom Burns
said. "Even those officers who looked like they might be close
to him, I suspect were not really close to him."
Judy Weis said, "I really can't say that I have met any Qwest
employee anywhere who has positive things to say about Joe
"It was a good day when it was announced he was leaving the
company, and it was a good day when we heard he was actually
convicted. And so it was a good day when he was sentenced."