AUSWR
The Association of U S West Retirees
 

 

 

Workers, retirees say Nacchio sentence fits
By Virgil Larson, Staff Writer
Omaha World-Herald
Friday, August 3, 2007

Judy Weis watched two momentous days in Joe Nacchio's life on closed-circuit TV.

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 held.

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) results."

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 fair."

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, he said.

"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 life."

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 Nacchio."

"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."

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