likely not key witness
Weisberg may testify about Qwest culture at Nacchio's trial
By Jeff Smith, Rocky Mountain News
Friday, December 30, 2005
Former Qwest senior executive Marc Weisberg may be useful to
federal prosecutors with his general knowledge of how the
Denver telco was doing in 2001 and of the pressure former
CEO Joe Nacchio exerted on employees to meet his
expectations, according to sources familiar with the case.
But Weisberg isn't expected to be a critical witness on
specific transactions or to possess a "smoking gun" against
Nacchio. Instead, potential key witnesses in the
government's insider trading case against Nacchio are
expected to include former Chief Financial Officer Robin
Szeliga, former President Afshin Mohebbi and former top
sales executive Gregory Casey.
Weisberg, Qwest's former executive vice president of
corporate development, pleaded guilty Wednesday to one
felony count of wire fraud in connection with a vendor stock
case and agreed to cooperate with the government.
Another indication that Weisberg's possible testimony isn't
deemed essential is that the government hasn't made a move
to delay his March 3, 2006, sentencing date until after
Nacchio's trial to be sure of his cooperation. Under the
proposed plea agreement, subject to court approval, Weisberg
would receive two years of probation, including two months
of house arrest, instead of jail time.
Nacchio was indicted on 42 insider trading charges last week
in connection with selling more than $100 million of Qwest
stock in the first five months of 2001. Nacchio is accused
of selling his stock at a time when he knew the telco wasn't
doing nearly as well as portrayed to investors. His trial
date hasn't been set.
Weisberg, a former investment banker and certified public
accountant, was considered one of Nacchio's top senior
executives during his tenure at Qwest from 1997 to 2001. He
managed Qwest's corporate investments and was involved in
mergers and acquisitions, including the U S West deal, which
closed in mid-2000.
But the relationship between Nacchio and some senior
executives appeared to grow tense in 2001 as Qwest struggled
to meet its financial targets and integrate what Nacchio
considered to be the plodding, bureaucratic culture of U S
West, a local phone monopoly, with the fast-moving culture
of Qwest, a nationwide fiber-optic company.
"It was simply cultural warfare, red state vs. blue state,"
said Tom Friedberg, a Denver telecommunications analyst at
the time and a former U S West employee. "Time and service
(U S West employees) resented youth and talent, and youth
and talent had no respect for time and service."
With Nacchio's pre-merger senior executive team cashing out
tens of millions of dollars of stock options, they no longer
had a financial incentive to work long hours.
Nacchio "didn't have the help of his senior lieutenants,"
When Weisberg and Lew Wilks, chief strategy officer, left in
fall 2001 on the heels of three other key departures, some
analysts expressed concern about Qwest's management depth.
Nacchio bristled. At a Goldman Sachs investment conference
in New York in early October 2001, Nacchio blamed the
management departures on an infirmity he described as "they
all got very rich."
"I've learned a lot of times that (when this happens), they
don't listen to you anymore," Nacchio said. They "would
rather buy a house in the Cayman Islands or Hawaii."
While Nacchio didn't mention anyone by name, Weisberg was
the one who had bought a vacation home in the Cayman
Islands. Weisberg was said to be upset by Nacchio's
Weisberg had made $29 million in stock profits by the time
he left Qwest, according to a
Rocky Mountain News
analysis based on Vickers Stock Research data. Weisberg
sold stock between February 1999 and January 2001, with
January accounting for about 25 percent of his sales.
While that overlaps slightly with Nacchio's alleged insider
trading period, Weisberg wasn't a target in that case.
Weisberg was indicted in a separate case last February,
alleging that he took advantage of his position to pressure
vendors to steer low-priced stock to him.
If Weisberg testifies in the Nacchio case, it may be more on
the order of a general characterization of Qwest's culture,
similar to Szeliga's testimony in the 2004 trial of four
former midlevel Qwest executives.
Szeliga testified in that trial that Qwest was a "pressure
cooker" and "chaotic" and that Nacchio expected better
financial results than Qwest's business units believed they