Top officers from Global Crossing and Qwest Communications denied wrongdoing Tuesday as lawmakers questioned whether aggressive accounting and sales tactics at the companies misled investors.
Global Chairman Gary Winnick and former Qwest CEO Joe Nacchio, two of telecom’s biggest names, made their first public remarks before lawmakers probing a slew of corporate scandals. The hearing didn’t produce clear-cut answers about what happened at Qwest and Global, but it did yield some consolation for Global employees.
Winnick pledged $25 million for Global’s retirement plan, which took a big hit after the company filed for bankruptcy protection in January. He says the amount equals the money 14,000 workers contributed to the company’s 401(k) plan in recent years. ”I call on other chairmen and CEOs to step up and write a check,” he said.
Winnick said he didn’t profit from inside information when he sold about 10 million shares for $123 million in May 2001, and he denied advance knowledge of a financial crisis building within the company.
Current and former officials at Global and Qwest faced tough questions from a panel of the House Energy and Commerce Committee. Lawmakers say the former Wall Street darlings used ”sham” deals to inflate revenue.
The hearings could aid probes of Qwest and Global by the Justice Department and the Securities and Exchange Commission, as well as shareholder lawsuits against the companies.
One Global employee, single mother Lenette Crumpler, told lawmakers that she lost $86,000 of her retirement savings. She said former CEO Tom Casey reassured employees that Global ”could weather the storm.”
Former Qwest employee Paula Smith worries about paying for college for her two daughters now that $230,000 of retirement money she had in Qwest stock is gone. Qwest shares, which rose to $64 in 2000, closed at $2.69 Tuesday.
Nacchio said he won’t follow Winnick’s philanthropic lead because Qwest isn’t bankrupt and its 401(k) could recover. But some lawmakers said Nacchio, who was ousted in June, bears responsibility for Qwest’s woes. Qwest said that improper accounting will force it to erase $950 million in revenue from 2000 and 2001. Another $531 million is at risk.
Qwest struck secret agreements with customers Global, Cable & Wireless and Flag Telecom that let it book revenue improperly, lawmakers said. The panel said it has company documents that show some board members questioned Nacchio’s ethics and his handling of accounting issues in a 2001 performance review.
Nacchio said he got an ”above average” review, noting that the board extended his contract.