Judge May Set Trial Date, Rule on Dismissal Request Today
By Shawn Young
The Wall Street Journal
Friday, March 24, 2006
A U.S. district-court judge in Denver today is expected to
set a trial date for Joseph Nacchio, the former Qwest
Communications International Inc. chief executive charged
with 42 counts of criminal insider trading.
Judge Edward Nottingham may also rule on defense arguments
for dismissal of the charges, which carry a potential prison
sentence of 10 years for each count and a financial penalty
of more than $100 million.
U.S. Attorney William Leone alleges Mr. Nacchio illegally
sold $101 million worth of the Denver-based phone company's
stock in 2001 when he knew the company wasn't doing as well
as it had led investors to believe. The defense says
prosecutors have presented a flimsy and flawed case.
Attempts to have the charges dismissed are commonplace and
carry virtually no risk for defendants, and they are rarely
entirely successful, say white-collar-crime attorneys not
involved in the case.
Herbert Stern, Mr. Nacchio's attorney, says his client had
nothing more than vaguely worded, speculative warnings from
other executives that the company might not meet financial
targets if business didn't improve. That isn't the same as
knowing that the company has actually faltered, according to
court filings by the defense. The defense also argues that
the information Mr. Nacchio had was, by definition, not
significant since the prosecution hasn't claimed that it
needed to be disclosed to investors.
"It's a pretty good argument to say the information wasn't
material if it didn't need to be disclosed. It's an argument
that has a lot of logical appeal," says Matt Jacobs, a
partner at McDermott Will & Emery, a law firm based in Palo
Alto, Calif., that isn't involved in the case.
But some other attorneys also not involved in the matter say
they doubt the defense will persuade the judge to drop the
case. "It's too cute by half," says Joseph Allerhand, a
partner at Weil, Gotshal & Manges LLP in New York. Companies
and executives aren't required to disclose every material
fact in real time, says Mr. Allerhand. Such a requirement
would make it impossible to run a business.
In its filings, the prosecution has argued that insiders can
have material information they don't have to disclose, but
if they do, they may not trade on it. Mr. Allerhand says a
key issue at the trial is likely to be whether Mr. Nacchio
knowingly violated rules that barred him from trading.
Qwest restated $2.5 billion in revenue and $2.2 billion in
earnings for 2000 and 2001. Mr. Nacchio isn't accused of
falsifying the company's books.
Shawn Young at