Anschutz to testify Thursday
By Tom McGhee, Staff Writer
Thursday, April 5, 2007
Qwest founder Philip Anschutz will be the first witness Thursday
morning as the defense begins presenting its case in the insider
trading trial of former Qwest CEO Joe Nacchio.
Anschutz will be followed by Giles Hays, a Catholic abbot. A
law professor named Daniel Fischel is scheduled to be the third
witness. Defense attorney Jeffrey Speiser named the upcoming
witnesses in open court today.
The prosecution rested its case earlier in the day after calling
20 witnesses in 10 days.
"The United States rests its case," announced assistant U.S.
attorney James Hearty just before 3 p.m.
U.S. District Judge Edward Nottingham recessed the trial for the
day, telling Nacchio's lawyers they should be ready to go with
their defense first thing Thursday morning. The government's
last witness showed jurors that Nacchio accelerated his stock
sales during the first five months of 2001 when compared with
his sales from January 1998 to December 2000.
Prashant Khemka, a Goldman Sachs analyst, testified for the
prosecution today that he had recommended that his company buy
Qwest stock in 2000. But a year later, he became so concerned
about Qwest's financial condition that he wrote a letter to
Qwest executives questioning the credibility of its financial
"There is a big credibility issue now surrounding Qwest," Khemka
wrote in the July, 2001, letter. "Why should we feel
comfortable with your projections and accounting practices when
the year 2001, so far, has been a year of failed promise and
The letter went on to question Qwest's projection of a 100
percent increase in revenue and subscriber base. Qwest later
said it projected a 60 percent increase.
"What changed so dramatically?," Khemka asked. "The wireless
industry has been fine all along. So it was a poor estimation
on your part or was it something else?"
Investors, Khemka said, gave the company's revenue targets the
benefit of the doubt during 2000 when it was pulling two
companies together in its merger with US West.
Former Qwest investor relations head Lee Wolfe had earlier
testified that he passed that letter to Nacchio.
Khemka also recalled a conversation he had with Nacchio in
Nacchio said: "Never believe a word of what management says at
the time of a merger. Do you think AOL Time Warner management
believed what they said at the time of their merger? Management
has to say things to get the merger done."
On cross-examination, Nacchio attorney Jeffrey Speiser got
Khemka to reiterate that Nacchio had a smile on his face when he
Khemka, who travelled from India to be a prosecution witness in
Nacchio's trial, said that during a conference call Nacchio
dropped a target for earnings growth from 20 percent to 17
percent, and then insisted that the 17 percent was the number
all along. In his letter Khemka complained that investors would
have to be fools to accept that.
Nacchio said the number had always been 17 percent or more and
investors had assumed it would be 20 percent, he added.
Khemka also said that he and others representing big investors
like Goldman attended a meeting with Qwest executives, including
Nacchio, at Qwest's headquarters in March 2001. After someone
from the company's wireless unit told the group it would be
difficult to make the targets set for the unit, Nacchio came
back into the room. Someone must have told Nacchio what the
wireless representative had said, Khemka said, before a defense
lawyer cut him off with an objection that Nottingham sustained.
Nacchio pounded the table and insisted the company would meet
its targets, Khemka said.