Up and Down 17th Street:
Qwest figure quietly leaves BearingPoint
By David Milstead
Rocky Mountain News
Wednesday, March 23, 2005
The last thing BearingPoint needs right now is Afshin Mohebbi.
BearingPoint is the former KPMG Consulting, based in McLean, Va. Let's just say the last few months haven't been good to the company: Its CEO resigned without explanation in November. The chief financial officer quit the following week, the same day the company acknowledged a $92 million error in its financial statements. (These were "not related," a spokesman said at the time.) As a bonus, investigators are looking at contracts BearingPoint got at the state and federal levels, and the SEC is probing the company's transactions with a customer.
At least the company can say former Qwest president Mohebbi no longer sits on its board of directors, as he did from April 2001 until the summer of 2004. After all, it's preferable to not have a board member sued in a fraud case by the Securities and Exchange Commission while all the rest of this is going on.
Mohebbi joined the board at the time Qwest and KPMG Consulting had a deal for the business advisers to sell products from Qwest Cyber Solutions, a joint venture between the two. (Incidentally, it was this conflict of interest that caused KPMG to cease auditing Qwest's books in 1999 - and turn the job over to Arthur Andersen.)
Mohebbi took in about $100,000 in director's fees over the three years. He got 15,000 stock options when he joined the board and another 12,000 in three annual installments. He sat on the audit and compensation committees.
While Mohebbi provided direction to BearingPoint, his world at Qwest was crumbling. In the wake of Joe Nacchio's spring 2002 resignation, few thought Mohebbi would be tainted by the allegations of financial fraud that were already swirling around the company.
But e-mails that leaked out before congressional hearings in October 2002 painted a different picture. They suggested Mohebbi was intimately involved in hatching side agreements with Qwest customers that, if known by the company's accountants, would have wiped out hundreds of millions of dollars in revenue. By the time Mohebbi testified, members of Congress were openly questioning his candor.
Within seven weeks, he had resigned "to spend more time with his family and pursue other business opportunities." By January 2004, Mohebbi was among a dozen former Qwest executives who had received "Wells notices," written statements from the SEC that say it intends to sue.
Still, Mohebbi remained on BearingPoint's board, although he wisely departed the company's audit committee.
What a rotten set of circumstances - BearingPoint has a board member under a cloud because of Qwest's accounting, and then it goes through its own series of scandals.
But actually, Mohebbi departed in time to avoid most of BearingPoint's problems - a fact we missed when we described him last week in our Qwest coverage as a BearingPoint board member. The company quickly alerted us to the error.
Unfortunately, it was easy to think Mohebbi was still involved. There certainly was no press release, no 8-K announcing a director departure. In fact, the company's most recent proxy statement from July 2004 detailed his "current" service on the compensation committee. The proxy did not tell investors that Mohebbi decided not to seek another term on the board. To realize that a board member would leave, you had to parse this disclosure:
"The Board of Directors currently consists of nine directors. . . . Two directors are up for election at the Annual Meeting. . . . The remaining six directors serve terms that expire at either the Annual Meeting of Stockholders to be held in 2005 or the Annual Meeting of Stockholders to be held in 2006."
Hmmm. Two plus six does not equal nine. Who's missing? Afshin Mohebbi.
A BearingPoint spokeswoman notes that the SEC does not require companies to disclose board members who decide not to stand for re-election once their term expires.
Yet given all that happened before - and all that happened since - a quiet departure must have been judged best.
David Milstead and James Paton take turns writing Up and Down 17th Street. Contact Milstead at 303-892-2648 or milstead@RockyMountainNews.com.