Former Qwest CEO Joseph Nacchio defended the Denver-based company's business practices Tuesday, telling a congressional panel that the company had never tried to meet its budget goals by "cooking the books."
Appearing before a House subcommittee, Nacchio (pictured, left) testified that the sale and purchase of fiber-optic network capacity was strategically important for Qwest. He said he also disagreed with claims by congressional investigators that these were done by Qwest simply to inflate revenues.New chief financial officer Oren Shaffer testified that Qwest decided last month to reverse $950 million in revenue booked from swaps because the company could not find paperwork supporting the deals. It was unclear why it was missing. Under questioning, Shaffer said the absence "has definitely piqued my curiosity" as to why the swaps were done.Nacchio said that while he was not involved in many of the alleged swaps, those transactions were heavily scrutinized by the company's financial and legal staffs."Neither I, nor to my knowledge did any, senior manager ever suggest, tacitly or expressly, that the company should attempt to meet its budget by 'cooking the books,' " he testified.Subcommittee members, lead by Congresswoman Dianna DeGette, questioned Nacchio over his sale of $235 million in Qwest stock and . Nacchio said the company is not bankrupt and maintains retirement plans.Nacchio also said he was given a $12 million severance package when he stepped down as CEO in June and also has a $1.5 million per year consulting contract with Qwest for the next two years.Congressional investigators are looking into whether Global Crossing and Qwest used misleading accounting to boost revenues artificially and thus give investors and financial analysts a false picture of the companies' financial health.Nacchio was questioned along with other executives of Qwest and Global Crossing as members of Congress suggested that they had misled both employees and investors on the financial health of their businesses.Oren Shaffer, Qwest's current vice president and chief financial officer, testified that the company continues to investigate its past accounting procedures and will make necessary changes to "ensure that the kinds of accounting problems we are finding do not occur again."Nacchio took issue with accusations surrounding his sale of Qwest stock. While conceding that he "earned significant compensation," he said he still retains 470,000 shares of Qwest stock and he never had doubts about the company's financial forecasts."At any time I sold Qwest stock, I believed that the company's financial statements represented a full and accurate picture of its financial condition," he said.The committee also took aim at Global Crossing leaders, including the chairman of the company's board of directors, Gary Winnick.In recent years, Winnick sold about 30 percent of stock he owned in the company, earning him more than $700 million dollars before Global Crossing declared bankruptcy.Panel chairman Greenwood said that Winnick and other company executives had knowledge of Global Crossing's dire financial situation, but urged stockholders to keep investing."Your message to the public was, 'Pay no attention to the man behind the screen,' " Greenwood said.Winnick said he was not aware of the predictions of company losses until after he had finished selling stock, which he said he did to help eliminate shortfalls in his investment firm.During his testimony, Winnick pledged to spend $25 million of his own money to compensate Global Crossing employees who held company stock and lost money in retirement plans. Winnick urged other executives to do the same. Nacchio firmly refused.DeGette, whose district includes Qwest headquarters, said: "I guess your answer is ... tough luck."