war tightens in Nacchio case
By Jeff Smith
Rocky Mountain News
Thursday, February 8, 2007
Federal prosecutors late Wednesday rebutted the claim by Joe
Nacchio's attorneys that they've been slow in turning over
evidence such as witness interviews. Prosecutors also said
that just because the former Qwest CEO was told by his
broker to diversify his investments and reduce his Qwest
stock holdings doesn't mean he didn't commit insider-trading
"The financial advice to diversify -- which is elementary
and universal -- is not inconsistent with the crime of
insider trading," prosecutors wrote in a federal court
Nacchio's attorneys on Tuesday requested a 60-day delay in
the March 19 trial, arguing they needed more time to
evaluate thousands of pages of evidence recently delivered
by the government. They also said that the government's
version of events was in doubt because of such evidence as
Nacchio's being advised to sell stock as early as 2000.
Nacchio faces 42 counts of insider trading in connection
with selling $101 million of Qwest stock in the first five
months of 2001. He has pleaded not guilty.
Chris Bebel, a former federal prosecutor who is an expert in
securities law, said it's predictable that the defense would
seize on the fact that Nacchio was advised to reduce his
Qwest stock holdings. But Bebel downplayed the significance
of the information.
"Any astute stock broker would convey this kind of advice"
to an executive who had a large concentration in one stock,
Bebel and Carr Conway, a former Securities and Exchange
Commission investigator, agreed with the government that the
revelation doesn't excuse Nacchio from the obligation to
refrain from selling stock if he had insider information.
Nacchio's attorneys also stressed this week that the
evidence shows that Nacchio told his broker in the spring of
2001 that Qwest stock still was a good buy. That evidence
could cut both ways, experts said.
While it may reveal Nacchio's optimistic state of mind,
Bebel and Conway said the government may argue it's
consistent with Nacchio painting a false picture of the
telco's financial health.
"It's a double-edged sword," said Conway, now director of
forensic accounting at the Heartland Dickerson Group in
Still, Bebel said the moves show a skillful defense team.
"These are minor chess moves, but it's nonetheless good
lawyering because the overall effect brought about by a
collection of minor chess moves can be significant," he
smithje@RockyMountainNews.com or 303-954-5155