8/12/2002

KUFM / KGPR

T. M. Power

Touch America Takes the Money and Runs

At the end of last week, the stock of Touch America, the telecommunications company that morphed out of the old Montana Power Company, was trading at 55 cents a share. In early 2000 before Montana Power gave up on its energy business, its stock was trading at $66 per share. Over the last two and a half years, the company has lost 99.2 percent of its stock value, tumbling from $6.9 billion in value to $57 million. The stock value is approaching the cutoff that will lead it to be de-listed from the New York Stock exchange because that stock has become a “penny stock” and because its total public value is below $50 million.

Touch American has invested a billion dollars in 20,000 miles of fiber optic cable. Industry-wide only about 3 percent of such cable is being used; the rest sits idle as a result of massive overbuilding. As a result, Touch America continues to report tens of millions of dollars in losses. Its cash resources, the result of selling off the Montana Power energy infrastructure, are wasting away and may disappear completely by year’s end.

In a display of America’s perverse version of corporate accountability to which we have all become accustomed recently, Touch America’s board of directors disciplined the architects of this fiasco by raising their salaries and giving them special bonuses totaling $5.4 million dollars. Given that the value of the company as of Friday was only $57 million, the board of directors gave this executive team that had succeeded in destroying 99.2 percent of the company’s value about 10 percent of the little that remaining of the $6.9 billion they squandered while stockholders face almost total losses and workers’ jobs hang in the balance.

This was too much for previous Montana Power Company executives and their families. For instance, the widow and son of former Montana Power CEO Paul Schmechel have sued to force the existing executives to return this multi-million dollar payout from a failing company. The outrage is not just tied to the fact that the people who engineered this corporate meltdown are being rewarded as if they were brilliant business strategists. It is worse than that.

The current leaders of Touch America are the same folks who ran the old Montana Power Company. While running Montana Power, they arranged for golden parachutes so that if some other company took over Montana Power, the existing executives would get the equivalent of severance pay as the new owners took over. That did not happen. Instead, the Montana Power executives themselves engineered a transformation of the company from primarily an electric and natural gas utility to a telecommunications company by selling off all of the energy assets and shifting the returns from those asset sales to Touch America. Then they changed the name of the company and continued operating the new company themselves. They were never taken over by anyone; they simply reorganized the company to fit their own fatally flawed business plan.

But greed knows no limits in contemporary corporate America. These executives declared that since they had taken over the company from themselves, they deserved the multi-million dollar golden parachute payouts. Their cronies on the board of directors were more than happy to do them the favor, whatever the consequences for stockholders and workers.

This whole corporate catastrophe is beyond comprehension. Yet none of the responsible parties in Montana feel any responsibility or shame in eagerly facilitating it. Our governor sits complacently in Butte petting her corporate lapdogs, including these failed Touch America executives, with a baffled Alfred E. Newman, “What, me worry?” grin on her face. The architects of utility deregulation in the state still insist that they did the right thing even though skyrocketing energy prices shut done a good part of the Montana’s industrial base last year, raised everyone’s electric rates, and turned the State of Montana into a subsidiary of Sioux Falls, South Dakota.

The crucial question is what will it take to cut through the paralyzing ideological fog that allowed these folks to convince us that large corporate businesses are always run by geniuses who have to be left alone to pursue their economic magic while the rest of us and our government are ignorant boobs who should not try to impose any standards of honesty and accountability on the corporate world. We now have seen where this deregulation path leads: Enron, WorldCom, Global Crossing, Qwest, and our own, homegrown, Montana Power-Touch America financial catastrophe.

When will we act to hold these corporate crooks and/or incompetents and the politicians who facilitated and supported them responsible for the economic wreckage they have caused? We should all be saying to the Touch America executives and their political allies what Joseph Welch said the Joe McCarthy: “Have you no shame, sirs, have you no shame?”