By Rocky Mountain News
Saturday, March 17, 2007
Joe Nacchio took Denver and the telecom industry by storm.
Qwest went public in 1997 and manufactured a deal to acquire U S
West. The stock moved from the Nasdaq to the NYSE, and soared
to more than $60. Nacchio and key deputies became
multimillionaires. Qwest's fall came quickly as investigations
began over questionable deals to boost revenue. By 2002,
Nacchio was out of a job. A federal grand jury indicted him in
Keep it simple. Prosecutors may show the jury a timeline
comparing what Nacchio knew, when he knew it and when he sold
Some of Nacchio's stock sales were on a prearranged schedule.
Prosecutors have given immunity deals to some potential
witnesses. Prosecutors won four guilty pleas against other
Qwest executives, but none served jail time. Some potential
witnesses also sold stock during the insider-trading period but
• Former Chief Financial Officer Robin Szeliga, who
pleaded guilty to insider trading: Szeliga said in her plea
agreement that she and other unidentified "senior Qwest
executives" knew by at least April 24, 2001, that various
business divisions weren't meeting revenue targets and that
management decided against telling investors the company was
relying on "gap fillers," such as questionable one-time sales
and swaps of network capacity.
• Former Chief Operating Officer Afshin Mohebbi:
Indicated in a Jan. 2, 2001, e-mail to Szeliga he had warned
Nacchio about the revenue targets being a stretch.
• Former investor relations director Lee Wolfe:
Documents indicate investors and analysts were asking Qwest to
disclose more about how it was generating its double-digit
• Former top sales executive Gregory Casey:
Settled civil-fraud allegations that some contracts were
backdated and that Qwest booked additional revenue by doing
capacity swaps it didn't need.
• Director Peter Hellman: Told a congressional
committee that Qwest's audit committee told management to
provide more disclosure to investors about one-time sales and
swaps of communications capacity. (Former audit committee
chairman Tom Stephens could testify about this instead.)
• Other witnesses: May include several other
former executives, likely some of whom already have settled
civil fraud allegations or pleaded guilty to crimes. Former
chief legal counsel Drake Tempest and former Chief Financial
Officer Robert Woodruff also are possible witnesses. A couple
of "victims" of Qwest's stock collapse are expected to testify.
Create reasonable doubt: National security defense may be used
to create fog in jurors' minds about Nacchio's state of mind
about the business. Defense argues Nacchio was optimistic about
Qwest's financial condition. Other defenses could include that
Nacchio was advised to diversify his stock holdings, that he
didn't possess "material" information required to be disclosed
to investors, and that he acted in good faith.
In a nutshell
The defense argues Nacchio reasonably believed Qwest was in line
to receive hundreds of millions of dollars of lucrative federal
contracts, more than enough to offset the weakness in the
business he was being warned about. The defense argues the
executives warning him about the weakening business weren't
aware of those potential classified contracts.
• James Payne, then head of Qwest's federal
government business, whose testimony could cut both ways:
In a November 2005 interview with prosecutors, Payne described
the speculative nature of many of the contracts and being
cautious about what he would include in his revenue forecast.
One potential contract, code-named "Ferrari," popped up from
time to time, but Qwest didn't win the contract until several
years later, he said.
The defense may argue Nacchio had direct contact with top
government officials such as Condoleezza Rice and former
counterterrorism adviser Richard Clarke, through a national
security telecommunications advisory panel. Payne described a
March 2001 meeting in the White House situation room attended by
15 to 20 people. Clarke asked another executive if it would be
possible to create a private network for the government.
Nacchio declared it was not only possible, but he had already
created private networks. Others argued it would be too
expensive. Donna Jaegers, an analyst for Janco Partners in
Greenwood Village, said last spring that Nacchio sometime around
2001 seemed "ga-ga" over the possibility of providing private
Internet network services to the government.
• Location: The federal courthouse is at Champa
and 19th streets in downtown Denver. The doors are expected to
open between 6:30 and 7 a.m., with the courtrooms opening about
• Jury selection: Monday's jury selection, which
starts at 8:30 a.m., will be in Courtroom A201, which seats
about 110 spectators. Several dozen of those seats will be used
by the prospective jurors.
• The courtroom: When the trial begins, it will
be held in Courtroom A1001, Judge Edward Nottingham's courtroom,
starting each day at a time that he determines. That courtroom
seats about 30 public spectators.
• The overflow room: There will be an "overflow
room," Courtroom A702, with a video feed from the courtrooms.
The room seats about 65.
• A few rules: Everyone entering the courthouse
must show photo ID and pass through a metal detector. Only
credentialed media may have laptops in the primary courtrooms.
Photographing, video or audio recording, or transmission of
court proceedings is prohibited. For Judge Nottingham's rules
of conduct, go to
• Thomas Hall, a former senior vice president of
sales, one year of probation after pleading guilty to a
misdemeanor count of falsifying a document in connection with a
deal to equip Arizona schools with the Internet.
• Marc Weisberg, a former executive vice
president, received two years of probation, 60 days of house
arrest after pleading guilty to one felony count of wire fraud
in connection with allegations that he made vendors "pay to
• Robin Szeliga, a former chief financial
officer, received two years of probation, six months of house
arrest after pleading guilty to one felony count of insider
• Grant Graham, former senior vice president of
finance. Pleaded guilty to one felony count of accessory after
the fact to wire fraud in connection with the Arizona schools
deal. Graham was given credit for his cooperation and being
under court supervision for 2 ½ years.
Still facing SEC civil-fraud charges:
• James Kozlowski, former accountant
• Afshin Mohebbi, former chief operating officer
• Joe Nacchio, former CEO
• Frank Noyes, former accountant
• Robert Woodruff, former chief financial officer
SEC civil-charge settlements:
• Gregory Casey, former top sales executive
• Augie Cruciotti, former executive vice
• William Eveleth, former senior vice president
of financial planning
• Loren Pfau, former sales manager
• Michael Felicissimo, former Qwest Wireless
• Steve Haggerty, former senior vice president
• Roger Hoaglund, former senior vice president
• Robin Szeliga, former chief financial officer