Tech Titans Prone to Scandals
Mark Hurd's surprise resignation as HP's CEO Friday following disclosure of a sexual harassment charge against him makes Hurd just the latest in a long line of tech CEOs forced to resign due to scandal.
It's actually been a bit quiet on the tech CEO scandal front of late, whereas the early and mid-2000s were full of apologies and resignations in light of various financial crimes, with insider trading and backdating of stock options being all the rage.
Here's a rundown of the most notorious cases:
Bernard Ebbers, WorldCom CEO
Ebbers, the so-called "Telecom Cowboy" who famously built what became the second largest long distance company in the U.S. through a series of acquisitions (including that of MCI and that almost included Sprint), resigned in April of 2002 http://www.networkworld.com/news/2002/0430wcomebbers.html amidst a financial scandal that resulted in the shamed executive going to prison.
Ebbers, who started in business running a chain of motels in Mississippi, was convicted of falsely inflating the carrier's revenue and stock price. At the age of 65, Ebbers reported to the Oakdale Federal Correction Complex in Louisiana to serve a 25-year sentence for his role in WorldCom's $11 billion accounting scandal.
John Rigas, Adelphia CEO
Rigas was one of the founders in 1952 of Adelphia, which became one of the largest cable companies in the United States and a growing player in telecommunications before its bankruptcy filing in 2002.
Rigas resigned as CEO in 2002 after being charged with security violations that wound up taking down what had grown from a successful family business into a public company way over its management team's head. During court proceedings, details emerged of how the company made up numbers to give to investors and lenders (and hid $2.3 billion in debts) while spending lavishly on cars and personal services. Not only did Rigas wind up going to jail for his crimes, but so did son Timothy, who had been Adelphia's CFO.
Time Warner Cable and Comcast wound up with much of Adelphia's assets.
Robert McCormick, Savvis CEO
CEO Robert McCormick resigned in late 2005 after American Express filed suit claiming it was owed money stemming from a $241,000 bill McCormick allegedly rung up at the New York topless club Scores about two years before. Savvis said at the time it investigated the matter and that McCormick "did not submit the charges in question to Savvis for reimbursement and that Savvis has not made any payment to American Express related to the charges."
A negotiated settlement was announced by the parties in 2006. While McCormick's issue paled in comparison to others on this list, the nature of it earned him disproportionate attention.
Joseph Nacchio, Qwest CEO
Joe Nacchio, who first caught the public's eye as a blunt talking pitchman for AT&T in the late 1980s, resigned as Qwest's CEO in 2002 after stockholders raised questions about his $27 million annual compensation package.
In March 2005, the Securities and Exchange Commission charged him, along with eight other former Qwest executives, with fraud. He was found guilty of 19 counts of insider trading in 2007, covering $52 million in stock sales, and sentenced to six years in prison.
As of July 2010, Nacchio was still seeking relief from the court on his sentencing, which was recalculated earlier this year to be two months shorter than originally (to five years, 10 months).