Qwest - Ethical Issue Analysis

Ethical Issue Analysis

xxxxx xxxxx

University of xxxxx

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course number

Instructor

April 20, 200x

Introduction

This paper will analyze the recent ethical issue of Qwest’s CEO, Joseph Naccino, in his insider trading trial that has just ended with his acquittal in 23 of the 42 insider trading charges against him. This will focus on the issue putting personal gain at the expense of others and hopefully describe the obligations of people who are at the controls of some of the worlds largest companies and highlight the consequences when they are not.

Issue

In 2002, Qwest, the third-largest U.S. regional phone carrier, became the target of federal prosecutors and regulators after it restated $2.2 billion in revenue for the preceding two years.

Joseph Nacchio served as Qwest’s chief executive officer and was a member of the company’s board of director from January 1997 through June 2002. Nacchio sold Qwest stock from January to September 2001 when he knew, but did not disclose publicly, that Qwest was unlikely to continue to meet it’s publicly announced earnings targets as that year progressed. According to federal law this is insider trading. That law prohibits corporate insiders, such as officers or directors, are forbidden from trading on material information regarding the company’s stock that has not been publicly disclosed.

In particular, the indictment states that Nacchio knew that Qwest’s 2001 financial targets were overly aggressive, that Qwest did not have a good track record in growing recurring revenue, that the company’s business units were underperforming, and that there would be insufficient non-recurring revenue sources to close the gap between Qwest’s publicly stated financial targets and its actual performance. It further states that Nacchio was specifically warned about this information.

Ideals

TRUST; “As chief executive officer with access to secret company information, Joseph P. Nacchio was an insider who knew, unlike the investing public, that Qwest was in dire financial straits.

Obligations

Nacchio abused his position of trust and illegally used this inside information to sell off more than $100 million worth of Qwest stock for personal gain. This is exactly how Enron started its decline and ultimate demise that devastated thousands of