Ethics of Qwest Communications Scandal

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Thomas Jefferson famously said, In matters of style swim with the current. In matters of principle, stand like a rock. Today, we live in a fast-paced world full of greed and hunger for personal gain.  As human beings are raised in different environments, atmospheres, and times, it is hard to draw a definite line of what exactly is ethical.  According to our textbook, there are five ethical perspectives that we will discuss as we review the Qwest Communications scandal. The five ethical principles include Universalism, Egoism, Utilitarianism, Relativism, and Virtue Ethics. This paper aims to address the Qwest Communications scandal, providing a background of the scandal and a business analysis of the ethical breaches.

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Qwest Communications was a Colorado-based telecommunication company that was involved in a wide spectrum of illegal and unethical activities organized and orchestrated by top-level managers. One of the Quest’s top-level managers was former CEO, Joseph P. Nacchio. Nacchio ‘s business ethics sparked the issues within the Organization by creating a culture where fraud and greed dominated the professional climate. As he chose to advance the company using trickery, he also destroyed the reputation of Quest Communications. 

On July 18, 1999, Qwest was in a merger agreement with US West. The merger was to be completed on June 30, 2000. One of the stipulations was that Qwest’s Stock needed to be trading at $28.26 and $39.90 per share, and if Qwest Stock was below $22 per share or the closing price was below $22 per share for 20 consecutive days, Us West had the option to back out of the deal. By August 9, 1999. Qwest’s stock price dropped significantly, all the way down to $26 per share shortly after the merger announcement. This is where Qwest’s internal environment and values changed dramatically and started to default on their corporate social responsibilities, economic responsibilities, legal responsibilities, and ethical responsibilities.

Before the stock prices could drop any further, CEO Joseph Nacchio ordered and implemented through other managers and employees an elaborate scheme where they inflated revenue and earnings reports. In annual, quarterly, and other statements they falsified the company’s real financial condition and by doing this they were able to acquire US West. Qwest fraudulently recognized approximately $3.8 billions of spurious revenue and fraudulently excluded $231 million in expenses.

After the acquisition, Qwest was still heavily engaged in fraudulent activities from aggressive accounting to insider trading. In 2005, former chairman and (CEO) Joseph Nacchio, former president and chief operating officer (COO) Afshin Mohebbi and seven former employees were accused of fraud in a civil lawsuit filed by the Security Exchange Commision. Nacchio was convicted of 19 counts of insider trading in Qwest stock. Qwest had to pay $1.5 million to the Pennsylvania Bureau of Consumer Protection after the state filed charges stating that Qwest using deceptive advertising techniques and slamming practices. 

In reviewing the Qwest Communications scandal through the lens of ethics and corporate responsibility, it’s clear that Qwest was an egoistic company. As the textbook defines egoism, it is the individual self-interest as the motivation to action. Egoism was the main ethical perspective that was driving Qwest upper management. Nacchio and all other persons that were supporting him were only concerned with themselves and how they could maximize their profits. 

Nacchio also neglected his ethical duties in leadership. As the primary strategic manager of the corporation and having the authority over everyone else, he was responsible for the organization. He decided to promote unethical behavior within the company. He bribed employees by promising bonuses for performance. Instead of operating based on integrity he ran the company with corruption.

Because of the poor decision making made by Qwest Communications, there were unfortunate outcomes for Qwest, personnel, and its investors. Qwest was no longer seen as a reputable company in the eyes of the public and had to pay back millions of dollars in restitution, court fees, etc. Share and stockholders lost billions of dollars in investments. CFO Robin Szeliga was barred from ever working in a corporate structure. Mr. Nacchio was also forced to resign from Qwest. Most of the upper management lost their jobs and were forced to pay hefty fines.

  After analyzing the Qwest scandal, I believe there were more ethical ways of doing business that Mr. Nacchio and his colleges could have chosen rather than operating on self-interest. I feel that when Qwest was in a merger agreement with US West, and management saw the company’s stock price was falling, they shouldn’t have taken it upon themselves to change the course of action. When Qwest optimistically projected their numbers in the first Quarter and seen that by the 3rd quarter their projections weren’t attainable. That is where they should have taken swift action and reported to all parties involved what the figures were saying. By taking this ethical approach, Mr. Nacchio could have avoided the pitfall that many people in the corporate world face and fail. If he would have been honest and forthcoming, he would have probably still been working at Qwest and more importantly, he wouldn’t have had to spend his time and energy covering up lies after lies.

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Ethics Of Qwest Communications Scandal. (2020, Jan 10). Retrieved September 30, 2022 , from
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