The Verizon Communications Inc. executive who oversaw the spinoff of directory business Idearc Inc. described the unit’s management internally as incompetent while Verizon was telling investors the group was “solid.”
John Diercksen, a Verizon executive vice president, complained in an October 2006 e-mail that the Idearc management team represented a “rising tide of incompetence” that reduced the value of the unit by $5 billion.
The e-mail was presented today in federal court in Dallas during a trial over Verizon’s spinoff of the subsidiary in November 2006. Idearc creditors sued Verizon, claiming the second-largest U.S. phone company saddled the business with $9 billion in debt, driving it into bankruptcy in 2009.
Diercksen is the first witness to testify at the trial. Werner Powers, a lawyer for Idearc creditors, has sought to portray Verizon as having a negative view of Idearc’s performance while it promoted the company to investors.
Verizon has called the lawsuit baseless.
Before the spinoff, Verizon described Idearc executives as a “solid management team with competitive industry experience,” according to materials given to investors.
In the October 2006 e-mail, Diercksen said Idearc management didn’t deserve bonuses.
“I did not care for the style of some of the things they had done,” he testified. “They were capable individuals.”
The creditors’ lawsuit is U.S. Bank National Association v. Verizon Communications Inc., 10-01842, U.S. District Court, Northern District Texas (Dallas). The bankruptcy case was In re Idearc Inc., 09-31828, U.S. Bankruptcy Court, Northern District of Texas (Dallas).
Editors: Fred Strasser, Peter Blumberg