TCS Daily

Captains of Cowardice

By Duane D. Freese - August 2, 2002 12:00 AM

The old law of the sea was that it was women and children first when a ship started to sink. The proverbial captain would stand at the helm and bravely go down with the ship.

Not so in modern corporate America. At least lately. Here the captains of industry are jumping ship, taking with them hordes of treasure, then letting the stewards, stevedores, other male passengers, women, children, dogs and cats, even little canaries, sink into the financial abyss.

So it was for Jeffrey Skilling at Enron. And for Bernie Ebbers at WorldCom. And now good old Joe Nacchio at Qwest.

With Qwest's restatement of earnings for 2000 and 2001, it's become fairly obvious why Nacchio "jumped ship" or was forced over the side in June.

A year after Nacchio left AT&T and took over Qwest, he proclaimed, "Someday I may buy AT&T."

To advance that quest, he had Qwest make an IPO of 13.5 million shares, which sold for $22 a share and raised nearly $300 million for starting a fiber network of more than 100,000 miles. He sold that bandwidth to business, and used the company's stock to buy up ISPs and then the fourth largest long-distance phone company, LCI International.

His biggest move, though, was to buy up the babiest of the remaining regional Bell operating companies, U.S. West, for $37 billion in stock in 2000.

The deal was declared "deal of the year" by the Denver Business Journal, where Qwest is headquartered. But a prickly Nacchio walked out of the breakfast when Sol Trujillo of U.S. West didn't show up to share in the presentation of the award.

It was somewhat symbolic. Since the June 2000 completion of that deal, Qwest's stock has taken a walk as well: down from $60 a share at one point before the merger to as low as $1.11 on Monday.

Nacchio, though, cashed a lot of his options out on the high side, raking in about $300 million from stock sales he said he made to balance his portfolio.

As he was laying off 17,000 Qwest workers, he got Qwest's board to increase his compensation to $3 million. And to get rid of him, the board reportedly paid him $6 million.

And what makes it all worse is that while Nacchio was cashing in for his performance, Qwest was fooling shareholders about its income by counting some $1.5 billion in bandwidth swaps with the likes of Enron as revenue, miscalculating equipment sales expenses, and otherwise, if not cooking the books, certainly dolling them up.

Qwest will be among the few - we hope - companies that won't meet Treasury Secretary O'Neill's Aug. 14 deadline for averring that their earnings' statements are valid.

Nacchio, like Skilling and Ebbers before him, has sailed into the sunset with hundreds of millions while leaving others to clean up their egoistic messes. Captains of industry, like those on the high seas, should go down with their ships if they run it onto the rocks, or at least not walk away with pay for their sorry performance. When they don't, they show they are captains of avarice and cowardice.



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