The same day the SEC filed its civil suit against Nacchio, a criminal jury convicted WorldCom founder Bernie Ebbers of fraud. Ebbers's corporate optimism was of a different order than Nacchio's; his finance chief testified that Ebbers essentially ordered him to cook the books, to the tune of $11 billion. Last week, a federal judge sentenced Ebbers to 25 years in prison.
The case against Nacchio relies heavily on alleged omissions, distortions and accounting tricks rather than evidence of criminal fraud. Still, former Qwest CFO Robin Szeliga pleaded guilty to insider-trading charges last week and agreed to cooperate with prosecutors, possibly laying the groundwork for similar charges against Nacchio, her ex-boss. And last fall, Qwest settled its own problems with the SEC by paying a fine of $250 million for overstating revenues, while declining to admit any wrongdoing.
Larry Winter
Taking stock: Shareholder activist Gerald Armstrong
sees telecom arrogance rising with executive pay.
Related Content
More About
The havoc wreaked by such creative accounting extends far beyond the companies involved. It put the squeeze on other companies to match their outrageous scores. A major factor in AT&T's decline, several analysts have suggested, is the pressure brought to bear by Wall Street firms lusting for the same kind of profits WorldCom was claiming -- profits that turned out to be illusory.
Qwest has revised its books and, under CEO Notebaert, is seeking to distance itself from its tainted past. Yet it failed in its bid to acquire WorldCom, now known as MCI, despite MCI's own tangled history of fraud and bankruptcy. Now the company is looking eagerly for other dance partners and seeking to throw off the remaining shackles of regulation.
Last month, Colorado became the ninth of fourteen states in Qwest's region to grant some degree of deregulation for the company in its efforts to be more competitive in business and long-distance services. Ron Binz, who served as a consultant to the Office of Consumer Counsel in the negotiations, says the deal that was hammered out protects the basic rates for residential phone service while giving the company more room to maneuver in markets where competition for local service is emerging.
"There's no consumer interest in making it difficult for Qwest to respond to competitors," Binz says. "They got substantial flexibility for their business services, but they still have to behave themselves in the marketplace."
The deal is not as generous as the ones Qwest has obtained from regulators in Nebraska and South Dakota, and less than what the company had sought. Binz doesn't expect it will dramatically hike rates or broaden services.
"Colorado is around the national average in residential rates," he notes. "What we don't truly have is a choice of local competitors for the small business and residential markets, which could push the price down. Most of the country is in the same boat."
6. WHEN ALL ELSE FAILS, STICK TO THE SCRIPT
The services for Ma Bell are winding down. The men in black have declared that the meeting will adjourn promptly at 11 a.m., even if they have to shut off the microphones to do it.
Shareholder approval of the proposed merger between AT&T and SBC is announced at 10:51 a.m.: 70.7 percent for, 4.7 percent against. To no one's surprise, the current board of directors is re-elected.
Gerald Armstrong heads for the mike one last time, to question the figures CEO Dorman has just rattled off regarding the vote count on the directors. Dorman gives up the numbers, even though he's disinclined to answer Armstrong's central question concerning the board's compensation: "How much is enough, and how much is too much?"
Eleven arrives. Dorman bids a hearty farewell. T-shirted union reps heckle the departing board. Somebody cues the exit music. Not a dirge, but Muzak suitable for boarding a flight to Aruba.
The mourners ride the escalators to the street, whipping out their cell phones as they go down.
