Prosecutors: Former Qwest CEO a Cheater
By Jon Sarche, The Associated Press
Wednesday, March 21, 2007
DENVER -- Former Qwest Communications CEO Joe
Nacchio, a firm believer in the telephone company's future, was
reluctant to sell shares in early 2001 and asked the board for
an extension but was turned down, his attorney says.
Nacchio "believed passionately, firmly and honestly in the
public financial targets of his company," defense attorney
Herbert Stern told jurors Tuesday during a two-hour opening
statement. "We're going to demonstrate and show and prove to
you that the accusations in this case are false."
Earlier, prosecutor James Hearty insisted that
Nacchio dumped $101 million worth of stock in the first five
months of 2001 because he knew that Qwest Communications
International Inc. could be in financial trouble.
"This is a case about cheating," Hearty said in his one-hour
opening statement. "He sold $100 million worth of Qwest stock
when he knew about problems at Qwest --problems that people
outside Qwest did not know."
Testimony was to resume Wednesday in Nacchio's trial with more
testimony from Lee Wolfe, a Qwest senior vice president of
investor relations in late 2000 and 2001.
Wolfe told jurors Tuesday that in late 2000, he and Nacchio
talked about the telephone industry and concern that other
companies were building fiber optic networks similar to Qwest's
About the same time, industry analysts "were trying to
understand how we were going to achieve our financial targets,"
He said there was a "golden rule" at Qwest -- never to take any
action that would hurt the stock price -- something Nacchio
communicated to employees.
After a jury of 11 men and seven women was seated, Hearty
emphasized to the panel that the case was straightforward and
had nothing to do with accounting.
Late in 2000, Nacchio became aware of problems Qwest would be
facing in 2001 and that the company could fall far short of
financial targets it had set publicly, Hearty said. At the same
time, Nacchio repeatedly "told investors that everything at
Qwest was great."
"Mr. Nacchio sold many more shares of Qwest stock during this
time period than he had ever sold before. In the first five
months of 2001, Mr. Nacchio sold 250,000 more shares than he had
in the previous 18 months combined," Hearty said.
"He told investors that he was very confident that Qwest would
achieve the high growth rates that he told them to expect,"
Hearty said. "But at the same time, he was being told different
information from (executives) at Qwest."
Qwest's stock price plummeted from more than $60 a share in 2000
to just $2 a share in 2002, and its near-collapse left thousands
of pensioners in financial trouble.
Stern countered that documents used by prosecutors to depict
Qwest's public growth targets were in fact about budgets set
internally that were designed as goals to energize Qwest workers
into exceeding those estimates.
In addition, Nacchio was aware of secret, potentially lucrative
government contracts that Qwest could win and the money would
help the company's financial picture, Stern said.
Stern promised that the defense would account for all of
Nacchio's stock sales and that they were timed in part by
Nacchio's contract with Qwest founder Philip Anschutz -- not
Nacchio also was being urged by his personal financial advisers
to diversify his portfolio, and in some cases he faced the loss
of stock options set to expire, Stern said.