Q: What just happened?
A: Today’s indictment of former Qwest CEO Joseph Nacchio follows a three-year criminal investigation into accounting irregularities that resulted in Qwest – the 14-state Denver-based phone company – wiping out $2.5 billion of improperly logged revenue for the years 2000-02. Qwest stock traded as low as $1.11 in mid-2002, thousands of employees lost their jobsand retirees’ 401(k)s were decimated.
Q: Why has it taken so long to bring criminal charges against Nacchio?
A: Given the complexity and size of the case, three or four years is not a long time, said one former federal prosecutor.
Q: Will this affect Qwest or its employees?
A: Not directly. Qwest settled a Securities and Exchange lawsuit for $250 million in 2004 and settled the largest of its shareholder lawsuits for $400 million in November. The executives named in SEC and Justice Department actions no longer work for the company.
Q: What about Qwest and its board?
A: Corporate boards are empowered with broad oversight responsibilities for a company, not day-to-day management. That makes it harder to prove involvement in misdeeds. A U.S. House committee that looked into Qwest’s financial collapse in 2002 found no indication that then-board chairman Philip Anschutz was in the loop with Nacchio on deals the SEC later claimed were fraudulent.
Q: When would a trial start?
A: Defendants have a right to go to trial 30 days to 90 days after they are indicted. But defendants frequently waive their right to a quick court date to prepare thoroughly. In that case it can take a year or years before a judge hears a case.
Q: What is Nacchio’s defense?
A: Nacchio’s lawyers have said that his stock sales were scheduled to diversify his portfolio, that he believed his public statements about Qwest’s financial statements to be true, and that he knew of possible Qwest contracts with the government that could boost the company’s revenues. He also has said that Qwest’s board of directors approved everything he did.
Q: What has Nacchio been doing since he was forced out of Qwest in June 2002?
A: Nacchio left Qwest with a two-year, $3 million consulting contract that has since expired. He returned to his home in New Jersey and has kept a low profile. He reportedly advised Leucadia National when the company was considering a bid for MCI. He is a board member of, and an investor in, New Jersey-based BCN Telecom.
Q: Have other Qwest executives been criminally charged?
A: Yes. Former Qwest chief financial officer Robin Szeliga was charged and has pleaded guilty to insider trading and is cooperating with prosecutors in the Nacchio case. Former executive vice president Marc Weisberg was indicted in February on 11 federal charges of wire fraud and money laundering, and is scheduled to stand trial in January. Indictments in 2003 against four former lower-level executives ended with two of them – John Walker and Bryan Treadway – acquitted and two others, Grant Graham and Tom Hall pleading guilty to reduced charges.
