Joe Nacchio Is Guilty ... of Being a Moron
By Tim Beyers
The Motley Fool
Friday, March 23, 2007
Let's say you know a CEO. He seems like a smart
guy. He's good with the press. He's also quotable and brash.
And he remains so, even after he/s sold more that $100 million
worth of company stock.
Trouble is, even as he's talking up the business, his management
team reportedly warns him that his projections are
unsustainable. He persists anyway because of top-secret
information only he and the feds possess: Lucrative government
contracts may be in the works!
Month later, no contracts have been signed and the business
begins to fall apart. Billion of dollars in revenue have to be
restated. And the CEO resigns in disgrace. Is he:
(a) guilty of insider trading
(b) guilty of fraud
(c) guilty of being a moron
I'll take "c," though a jury of Joe Nacchio's peers is charged
with determining if the real answer is "a."
For months, the former Qwest CEO, accused of looting by the
feds, has been preparing for a trial that could cost him his
fortune and land him in jail alongside former WorldCom CEO
Bernie Ebbers and former Enron CEO Jeffrey Skilling.
Preparations included a dramatic tale worthy of James Bond, in
which CEO/secret agent Nacchio possessed top-secret details of
lucrative government contracts that were forthcoming.
Therefore, the theory goes, Nacchio was being truthful, if
pugnacious, in his public statements.
Not surprisingly, the feds disagree. Press reports say
prosecutors are prepared to show that members of his management
team, including former Chief Financial Officer Robin Szeliga,
repeatedly warned Nacchio that his estimates were far too
Defense attorney Herbert Stern counters that Szeliga and other
witnesses like her prove nothing because they didn't know about
Nacchio's secret deals. Perhaps he's right. Perhaps Qwest was
on the verge of signing big contracts that would have vindicated
Even so, that doesn't excuse his actions. Think about it.
Nacchio could have easily adjusted guidance so as to make the
super-secret federal contracts a pleasant surprise for the
Street if they ever came through.
Instead, Nacchio abandoned every principle of conservative
management in running Qwest. The feds say he did it to line his
own pockets. My guess is that they're right. But irrespective
of his motives, his poor management of one of Denver's largest
employers destroyed lives.
Joe Nacchio is guilty, all right. Guilty of being a moron.