Joe Nacchio: CEO or Secret Agent?

If you read the tabloids, you know that many of us lead double lives -- especially the rich and marginally famous. Take celebrity therapist Dr. Phil, for example. He's apparently being recruited by the Central Intelligence Agency.

Were that really true -- it isn't -- Dr. Phil would have good company in former Qwest (NYSE: Q  ) CEO Joe Nacchio. Allow me to explain. Authorities have made Nacchio the centerpiece of a federal investigation into an accounting scandal that forced the telco to restate its 2000 and 2001 earnings, which were found to be inflated by an aggregate of $2.2 billion.

Nacchio has long denied any wrongdoing in the case, but some might argue he was somewhat more fortuitous in his timing of sales of Qwest stock than your average Joe or Jane Oddlot. Nacchio's defense has been that he established a regular program of pruning to diversify his portfolio and that his hyperbolic public statements that touted the company were nothing more than optimistic puffery grounded in a naive belief that the business was just humming along. Call it the "I didn't know someone else was cooking the books" defense, if you like.

It now appears the story has changed. According to yesterday's edition of The Wall Street Journal, Nacchio's so-called pumping was motivated by the knowledge that the firm had landed secret national security contracts and was expecting to receive more. In other words: By day, he was a mild-mannered spreadsheet-touting CEO. By night, he was a back alley negotiator brokering secret deals with government spooks promising to increase sales and earnings for years. Call it the "I could tell you but I'd have to kill you" defense.

Although the Journal story doesn't say so, Nacchio's lawyers, if they go this route, will be arguing in effect that he was, at best, a simpleton. After all, he's said he was overly optimistic in his public statements about the business.

There are two potential conclusions. At worst, Nacchio engaged in his share of impropriety, as certain press reports have alleged. At best, he seems to have been acting in his own self-interest. But in retrospect, neither scenario casts him in such a favorable light, and neither approach made common stockholders much money.

Don't hang up yet. We've got related Foolishness for you:

Don't be fooled by the market's hucksters. Give your portfolio a dose of reality by taking a risk-free trial to Motley Fool Inside Valueand get access to all 30 buy reports and more than a dozen insightful investing lessons. All you have to lose is the prospect of better returns.

Fool contributor Tim Beyers still thinks the sight of the Qwest building at night makes for a nice addition to Denver's skyline. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 498303, ~/Articles/ArticleHandler.aspx, 11/28/2014 6:06:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement