The Association of U S West Retirees



Nacchio trial pleases Qwest veterans
Joseph Nacchio's nine-figure payday still stings Qwest employees, whose retirement accounts took a hit.  They'll be watching the former CEO's trial closely.
By Neal St. Anthony
Minneapolis Star Tribune
Friday, January 13, 2006

You sure can't blame Qwest retirees Marlyn Beaudine of St. Cloud and Arnie Albrecht of suburban St. Paul and thousands of others retirees and employees for smirking a bit recently. Their one-time boss, former Qwest CEO Joseph Nacchio, the guy who bagged $101 million in 2001 from the sale of Qwest stock, was indicted last month on 42 counts by federal prosecutors who allege that Nacchio cheated and lied on his way to that nine-figure gain.  According to high-ranking subordinates set to testify against him, Nacchio ordered inflated revenue and earnings as he quietly sold his own stock ahead of the news that the telephone company was failing amid the telecommunications bust.  Qwest stock fell from a high of $64.50 to a low of $1.24.  Under new leadership, the stock has clawed its way back above $5.

"I'm glad that the justice system is moving forward with him," said Albrecht, a 38-year Qwest veteran.

"With about $3 billion in revenue booked incorrectly, obviously somebody was badly mistaken or crooked," he said.

"He was the top guy.  He was responsible, whether he did it personally or created a pressure culture on subordinates to meet his objectives," Albrecht said.

Unfortunately, he said, Nacchio's prosecution won't do anything for the thousands who had part of their 401(k) funds invested in Qwest stock.

"The company match was always in Qwest stock," he said.

Nacchio, 56, who led the Denver-based company that provides telephone and related services to Minnesota and 13 other states, pleaded not guilty and was led away in handcuffs.  He's free on $2 million bond. 

A trial date is expected to be set for later this year.  Nacchio's lawyers are expected to argue beginning this month that they might need months to a year or more to prepare a complicated defense for a guy who might even invoke national security considerations as part of his case.  Nacchio, who once served on a President Bush-appointed telecommunications advisory panel, has indicated that he possessed secret information that made him optimistic about Qwest's government business prospects.

The government's witnesses will include a number of former Qwest executives with another allegation:  Nacchio was a panicked bully for whom they inflated the numbers.

Get ready for a donnybrook.  The Nacchio trial will be the latest among the three-ring corruption trials that already have claimed the bigshots at WorldCom and Tyco.

Still ahead:  the mother of all white-collar prosecutions:  the two top guys at the former Enron, which has become the national proxy for short-term greed and executive self-dealing.

Christopher Cox, the former Republican congressman who now chairs the Securities and Exchange Commission, said recently that there has been public benefit in terms of better disclosure and more accountability as a result of the Sarbanes-Oxley Act of 2002, hurriedly passed in the wake of the corporate scandals that shook investor confidence in a swooning stock market.

"With just a few years of Sarbanes-Oxley under their belts," Cox said recently, "most companies are begrudgingly admitting that the exercise has produced benefits."

However, the compliance-and-auditing portions of the law are costing billions of dollars annually in what many firms, particularly small public companies, have complained are ridiculous redundancies.

Some of that might get rolled back under recommendations made last month by a Sarbanes-Oxley review commission headed by Janet Dolan, the just-retired CEO of Tennant Co., who, like other responsible executives, wants the stepped-up corporate governance and executive-accountability provisions retained.

Investors, including some of the country's most sophisticated asset managers, still complain that they often can't figure out how much the top dogs at some public companies are getting paid.

Cox wants more transparency.  SEC commissioners took a big step in the right direction this week by proposing rules to require big companies to uniformly disclose more about top executive compensation, including perquisites, retirement benefits and a total-compensation figure.

This is good.  Investors should at least know what they're paying for the performance they're getting.

Neal St. Anthony 612-673-7144