AUSWR
The Association of U S West Retirees
 

 

 

Qwest Prosecutor Denies Claims Case Is Erroneous
By Shawn Young
The Wall Street Journal
Friday, February 24, 2006


A federal prosecutor said his 42-count insider trading indictment against former Qwest Communications International Inc. chief Joseph Nacchio is solid enough to withstand Mr. Nacchio's claim that it is so flawed it should be dismissed.

In a filing with U.S. District Court in Denver late Friday, U.S. Attorney William Leone defended the indictment against defense claims in filings earlier this month that the charges were too vague, were riddled with legal errors and didn't provide enough information about the crimes Mr. Nacchio allegedly committed.

Mr. Nacchio was indicted in December on insider-trading charges stemming from $101 million in sales of Qwest stock he made in 2001, when he allegedly knew the Denver-based phone company wasn't doing as well as he claimed.  Each count carries a potential penalty of 10 years in jail.  The government also seeks $101 million in penalties, reflecting the face value of the stock Mr. Nacchio sold that year.

Mr. Leone disputed claims by Nacchio attorney Herbert Stern that the negative information Mr. Nacchio had was highly speculative and not material.  "The government will introduce evidence that Qwest's actual recurring revenue performance was far below the plan announced to the public while the defendant was selling his stock and that the defendant knew it," Mr. Leone said in his filing.

He said his charges meet all legal requirements for specificity and dismissed the defense's claims as a legally flawed attempt to get information the government isn't required to provide.

Qwest, a star of the late 1990s technology and telecommunications boom, ultimately restated $2.5 billion in revenue and $2.2 billion in earnings for 2000 and 2001, the year the accounting problems began to emerge.  Mr. Nacchio was forced out of his post in 2002 as the accounting scandal mounted.

Neither Mr. Nacchio nor any other former Qwest executive faces criminal charges of falsifying the company's books, though Mr. Nacchio and former Qwest executive Afshin Mohebbi, along with other former executives, face civil fraud charges from the Securities and Exchange Commission.  Mr. Mohebbi, who had been promoted to president, has been given immunity from prosecution and is expected to be an important witness for the government.

Write to Shawn Young at shawn.young@wsj.com

http://online.wsj.com/article/SB114083657300683320.html?mod=INDUSTRY