Qwest Ex-CEO Is Back in Telecom

Joseph P. Nacchio stepped down as chief executive of Qwest Communications International Inc. in 2002 in the spotlight’s glare during a storm of questions about the company’s accounting that ultimately led it to erase $2.5 billion in revenue. Now he has quietly returned to the telecom industry.

Nacchio has invested in a small, privately held New Jersey company, BCN Telecom Inc., that buys phone and Internet service from major carriers and packages and resells it to small and medium-size businesses.

BCN’s chief executive, Richard M. Boudria, has known Nacchio for about 20 years, since the latter was an executive at AT&T; Corp. The two men are neighbors in exclusive Mendham, N.J.

“He’s not involved in the day to day, but we have an active board, and certainly Joe plays a key role in the strategy and planning and governance of the company,” Boudria said. “He has the experience, he has the relationships.”

Boudria said he had invited Nacchio, 55, to invest and become actively involved in BCN Telecom.

Nacchio, through spokesman Bill Anderson, declined to comment for this article. BCN Telecom is “one of a number of private companies in which he is currently active,” Anderson said.

Nacchio’s salary, bonus and sales of Qwest Communications stock totaled more than $100 million in 2001, his last year at the regional telephone company. But when he and Qwest founder Philip Anschutz left, questions about its accounting had grown so intense that employees cheered when Nacchio’s replacement was introduced and the stock gained 20% in a day.

In the aftermath of the accounting scandal, two executives have been acquitted of criminal wire- and securities-fraud charges, a third pleaded guilty to a single charge of accessory after the fact and a fourth faces a retrial after a jury deadlocked on fraud charges.

A Securities and Exchange Commission investigation of the company’s accounting under Nacchio is ongoing, as is a federal criminal investigation, Qwest said in its 2003 annual report.

The company also faces nine securities suits, most of which either name Nacchio as a defendant or include “former officers.” Nacchio has not been charged with any criminal wrongdoing and has settled two civil suits.

Although he left under a cloud, for the early part of his tenure at Qwest, Nacchio was seen as a hero. Nacchio took Qwest public and acquired US West in 2000 to become a major supplier of telephone service in 14 states in the West and Midwest, with $16.5 billion in revenue in 2001.

Qwest spokesman Robert Toevs said the one-year noncompete clause in Nacchio’s severance had expired, and the company would gladly do business with its former CEO.

“We’d welcome BCN as a customer. We’d rather sell wholesale services to a customer like BCN than lose a customer to a competitor like a cable TV company,” he said.

Analysts who follow the telecommunications industry said they viewed Nacchio as a talented manager but did not want to speculate on his effect on BCN Telecom.

Peter Rhamey of BMO Nesbitt Burns said of Nacchio, “He did what he did, and the company is under investigation.”

BCN Telecom is based in Bedminster, N.J., and was founded 10 years ago by Boudria as International Telephone Group.

It was bought by NUI Corp., an energy holding company, in 1999 and became NUI Telecom Inc. An investor group led by Boudria bought it back in December.

Boudria said the major shareholders were him, with a 13% stake; a group led by Nacchio, with 36.1%; and a group with 37.3% led by Peter J. Cocoziello, founder of Advance Realty Group of Bedminster, a commercial and residential builder.

The BCN name comes from their initials.

BCN Telecom’s corporate secretary is Nacchio’s brother, Richard F. Nacchio, whom Boudria said also worked for AT&T.;

Compared with giants such as AT&T; and Qwest, BCN Telecom barely registers on the telecommunications landscape.

The company has 38 employees, down from 56 in January, Boudria said, after eliminating a layer of managers and adding more automation for clerical work.

“I’m in the process of hiring more people in the sales and marketing group,” he said.

Boudria said BCN Telecom was certified in 35 states to provide local telephone service and was working to get approvals to provide voice and data service nationwide.

BCN’s financial statements remain closed to the public, and Boudria declined to provide any.

However, he said the company had 14,000 customers and expected $40 million in revenue in 2004. He said it was aiming to more than double revenue to $100 million in 2006.

“We’re making significant progress,” he said. “We’re very profitable.”

Asked whether he was considering taking the company public, Boudria said, “Once you get to that $100 million, that seems to be a threshold where you can generate interest in the financial community.”