evidence suggests how Nacchio trial will play
Contract talks with U.S. could cut both ways
By Jeff Smith
Rocky Mountain News
Saturday, February 10, 2007
Defense attorneys say their case is bolstered by brokers who
advised Joe Nacchio to sell Qwest stock. Federal
prosecutors say their side is boosted by evidence that Qwest
wasn't about to land the lucrative government contracts
Nacchio says it was.
Such details and more have emerged in recent court filings
and hearings, in advance of former Qwest CEO Nacchio's March
19 trial. Nacchio faces 42 counts of insider trading in
connection with selling $101 million of Qwest stock in the
first five months of 2001.
As other white-collar trials have proved, it's almost
impossible to predict how a jury will take in evidence.
Often, the same material can be viewed in different ways.
Federal Judge Edward Nottingham this week made that point,
saying some of the evidence turned over to the defense
seemed to be ambiguous or cut both ways. He also was
adamant the 7 1/2-week trial would start on schedule and
scolded both sides for wasting time arguing like "petulant
children in a sandbox" over evidence exchange.
Here are some of the recently disclosed details and how they
could play in the trial:
previously have asserted that various "clandestine"
government agencies were actively considering awarding
hundreds of millions of dollars of top-secret contracts to
Qwest in 2001. Some of those agencies already were Qwest
customers, and Nacchio also may have had private discussions
with top government officials as a member of a national
security advisory panel.
Prosecutor Leo Wise said in court this week that the
government possessed contract documents that contradict
Nacchio's story. Wise specifically referred to talks with
an undisclosed agency that Nacchio asserted resulted in a
contract, while the agency maintained talks had broken off.
"Nacchio is trying to dig up as much evidence that the
business prospects of the company were impressive and he
knew it, and therefore was not motivated to sell (stock),"
said Chris Bebel, a former federal prosecutor and expert in
securities law. "But you can bet prosecutors have a couple
of witnesses lined up saying that (the discussions) never
progressed very far."
A recent court filing
states that two stockbrokers, both of whom handled some
of Nacchio's 2001 transactions, told the government they
advised Nacchio to reduce his Qwest holdings. Nacchio
supposedly told one broker in the spring of 2001 that he
thought Qwest stock was still a great buy.
The defense argues that evidence casts doubt on the
government's theory that Nacchio was dumping stock because
he thought the company's financial condition was weakening.
"I think the question remains, 'Did you have insider
information' (that the company's finances were getting
weaker)," said Carr Conway, a former federal securities
investigator who now is director of forensic accounting at
the Heartland Dickerson Group in Denver.
Experts say Nacchio's statement that Qwest stock was a great
buy could go either way. The defense likely will argue it
shows Nacchio believed the future was bright, while
prosecutors could argue the statement was consistent with
Nacchio's painting a false picture of the telco's financial
smithje@RockyMountainNews.com or 303-954-5155