Qwest founder won't be witness/ Anschutz played a 'ceremonial' role

WASHINGTON - Congressional investigators decided late Friday not to call Qwest founder Philip Anschutz before a House panel next week after a 21/2-hour interview convinced them he was a ceremonial player at the telecommunications company.

"Based on his interview, we did not believe he would bring anything to the table and as a result will not be called as a witness," said Ken Johnson, spokesman for the House Energy and Commerce Committee. "He played a ceremonial role at Qwest, and we don't need any ceremonial witnesses."

The hearings into the activities of Qwest and Global Crossing, a fiber-optic company that declared bankruptcy in January, will continue Tuesday before the oversight subcommittee.

The two companies' practice of swapping fiber-optic communications strands and then logging the transactions as profitable despite no financial or business benefit is chief among the concerns of the House panel.

"We're simply trying to determine why Global Crossing and Qwest entered into these questionable transactions despite red flags being run up by company insiders," Johnson said. "Time and time again, we know through internal correspondence executives at both companies warned that the so-called capacity swaps could create huge problems for their respective companies.

"We're just trying to get to the bottom of it, who knew what and when did they know it, who is responsible for approving the deals that led to bankruptcy of Global Crossing and the financial problems now being experienced at Qwest," Johnson said. "Someone ultimately approved these deals, and someone ultimately has to be responsible for them."

With Anschutz eliminated as a witness, the committee will concentrate on Qwest's former chief executive, Joseph Nacchio, and Chief Operating Officer Afshin Mohebbi, both scheduled to appear.

"Clearly Joe Nacchio, who served as vice chairman of the board, was in the driver's seat and knew much more about these deals than Mr. Anschutz," Johnson said.

Johnson said Anschutz was asked whether he had any specific knowledge of individual transactions, if he personally approved any of the capacity swaps and if he knew the company was relying more and more on these transactions to try to meet its revenue projections.

"His answer to all the questions was 'no,'" Johnson said.

Anschutz's lawyer gave the four committee investigators documents involving the stock sale that has been a key question swirling around Qwest's founder. Anschutz sold $213.5 million in Qwest stock last year while company officials were discussing the deteriorating business climate at the company.

Anschutz still has about 18 percent of stock in the local telephone service provider for the West, or about 301 million shares, according to regulatory filings.

"We're convinced it (the stock sale) was arranged sometime in advance of the actual sale," said Johnson, who defended statements emanating from the committee questioning the sale.

"When you discover an e-mail about company insiders discussing financial problems and five days later the chairman begins to sell stock, it's a logical follow-up question for Mr. Anschutz," Johnson said.

"He answered it to our satisfaction, and we're moving on without him."

Members of Congress say they want to know more about the role of Qwest's board of directors and internal auditing committee after the company's former chief financial officer told the panel at this week's hearing she had serious questions about their practices dating back more than a year.

Rep. Diana DeGette, D-Colo., said she wants to follow up on the statement of former Qwest Chief Financial Officer Robin Szeliga.

Szeliga told the oversight panel Wednesday she went to the company's auditing committee concerned trades with other telecommunications companies went against Qwest's policies.

"What I'm hoping for is to get more information on why Qwest was engaging in all these deals," said DeGette, a member of the subcommittee.

"One of the issues that I'm very interested in is that the board was apparently made aware of some of the agreements in August 2001. I'd like to further examine the role of the board."

TELECOM ODYSSEY

1988: Denver oil baron Philip Anschutz buys Southern Pacific Rail Corp., founds SP Telecom to lay fiber-optic telecommunications lines alongside tracks.

1995: SP Telecom acquires Dallas-based long-distance microwave telecommunications carrier Qwest Communications Inc., adopts the Qwest name and offers long-distance service to commercial users.

1996: Qwest CEO Douglas Hanson replaced by Joseph Nacchio, AT&T executive asked to step down from ailing consumer long-distance unit.

1997: Qwest raises $297 million by selling 13.5 million shares at $22 a share in initial public offering.

1998: Qwest acquires Golden-based Phoenix Network Inc. and LCI International Inc., suddenly becoming nation's No. 4 long-distance carrier. Strikes marketing deal with U S West, paying a recruiting fee for each U S West client that picks Qwest for long-distance service.

1999: BellSouth Corp. buys 10 percent of Qwest. After bidding war with rival Global Crossing Ltd., Qwest says it will buy US West Inc. and its 25 million customers to create $86 million company. U S West fined for poor customer service.

2000: Nacchio remains CEO of merged company, which lays off about 4,500 workers, says another 6,500 jobs to be shed in 2001. Qwest sells long-distance assets to Touch America for $200 million. Nacchio makes $93.7 million cashing out stock options.

2001: Nacchio decides to exercise 6.1 million stock options over two years, leaving him with 14 million stock options and 471,000 shares worth about $18.7 million.

2002:

March - Qwest accounting procedures come under SEC scrutiny after Global Crossing's bankruptcy. Company sells $1.5 billion in bonds to pay off mounting debt.

April - Announces 2,000 job cuts.

June - Nacchio steps down. Anschutz resigns as chairman.

July - Criminal investigation launched by U.S. attorney. Company says it will restate earnings for past three years.

September - Qwest avoids bankruptcy, reaching new terms on $3.4 billion in loans. Congress holds hearings on deals Qwest made with Global Crossing to swap network capacity. Qwest says it may have to restate $1.5 billion in earnings from 2000 and 2001.

- Steven Saint; The Gazette

Copyright 2002
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