The meteoric rise of former Qwest chairman Joseph Nacchio has culminated in ex-CEO Nacchio sentenced to six years in federal prison. Federal Judge Edward Nottingham also ordered Nacchio to pay a $19 million fine and forfeit $52 million he gained in illegal stock sales.
Nacchio was convicted on 19 of 42 counts of insider trading case on April 19th, 2007.
Today he was sentenced in federal court.
Ousted by the Qwest board in 2002 as the company faced investor lawsuits and an SEC investigation. Qwest stock price fell to $1.11 shortly after Nacchio left the company. Nacchio grossed more than $250 million during his tenure at Qwest.
He was often critized for making 10 million times the minimum wage in options and bonuses in one year. Nacchio has been the symbol and poster boy for corporate/ personal greed and Enron-like accounting gimmicks,investor scandals and over- compensated executive pay packages.
The Denver Post captured the tenor of investors last year:
The big winners in Qwest's resurgence could be the longtime shareholders who suffered significant paper losses during the Joe Nacchio days but stayed committed to the company.
Qwest stock hit an all-time low of $1.11 in August 2002, two months after Nacchio resigned and was replaced by Richard Notebaert as chief executive.
Many retirees, such as Hazel Floyd, stuck with Qwest and have realized a gain of about 700 percent on their shares since then.
Qwest stock jumped another 4 percent Wednesday to close at $8.75 a share, its highest close since March 2002. The company said it is considering a stock buyback or a dividend.
"It will certainly help if they decide they can pay some dividends," said Floyd, who said she worked for Qwest and US West for 30 years.
What other option did Ms. Floyd have after 30 years?
In an age of white collar wrist slaps and corporate malfeasance, the verdict is a victory for the thousands of pensioners and investors who lost billions in the collapse of Qwest.
The very real human toll of employee pensions, investor losses and lost confidence in Qwest hit the Denver Metropolitan economy and Mountain West communities that relied on the Giant former Baby Bell for telephone services.
Denver Billionaire and rightwinged Republican Philanthropist,Phillip Anschutz, who owned the Southern Pacific Railroad at the time, began installing the first all-digital, fiber-optic infrastructure along his railroad lines and connecting them into central junctions in strategic locations to serve businesses with high-speed data and T1 services. In 1998, the Southern Pacific Railroad was merged into the Union Pacific, in which Qwest gained access to UP's railroad lines to lay fiber-optic cable for its telecom network. Wiki
Anschutz is founder and major stakeholder of Qwest:
From the Denver Post:
Some board members, however, now are concerned that Notebaert(current Qwest CEO) is moving too quickly to distance Qwest from the Nacchio era. Sources say the message from Anschutz to Notebaert is: Make sure that Qwest's internal investigations are thorough, not just quick.
Former employee confronts Nacchio about 401(k) loss Former Qwest employee Paula Smith was zipping to the airport in a cab at 4 in the morning on a Monday, trying to steady a sheet of paper on her lap so she could write the statement she would deliver to Congress. "I'd like to tell a story, a short story," she wrote.
Immediately she scratched out the word "short." How could the 52-year-old technical writer shortly sum up 20 years of employment, mostly with US West? How she lost most of the savings she placed in the company's 401(k) program? How could she shortly sum up all the emotion, all the sadness after losing what she thought was a college nest egg for her two young daughters, Kelsey, 14, and Ali, 12?
Smith, like thousands of Qwest employees, like thousands of Enron employees, like thousands of WorldCom employees, suddenly had to re-evaluate her life.
Attempts to paint Nacchio as the Qwest scapegoat have left Anschutz curiously outside of all the fray.
Qwest hasn't disclosed what it has paid of Nacchio's legal tab, or how much of this liability is covered by insurance policies. But one thing seems clear: Nacchio cheated his shareholders and his shareholders have since had to pay for his lawyers. The appeal could push costs over $75 million.
Nacchio's employment contract, as quoted in the lawsuit, indemnifies him "against all liabilities and reasonable expenses ... in any threatened, pending, or completed action, suit or proceeding, whether civil, criminal or administrative, or investigative."
However, many investors and employees in Denver are still on a quest to know of the rise and fall of Qwest.