Testimony left jurors no picnic
By Al Lewis, Staff Columnist
Sunday, April 15, 2007
Judge Edward Nottingham told jurors deciding the
fate of former Qwest CEO Joe Nacchio that they must gauge the
credibility of each witness.
What a task. There were 21 prosecution witnesses and three
None were beyond reproach.
"Screw 'em. Go tell them to buy."
That's how Qwest's former investor relations guy, Lee Wolfe,
quoted his former boss, who is up against 42 insider trading
counts. Wolfe said in testimony that he'd asked Nacchio how to
respond to Wall Street analysts.
Wolfe also said Nacchio had a golden rule: "The Golden Rule is,
you never said anything that would made the stock price go
Wolfe, given partial immunity, had his own golden rule. He
bagged $1.6 million in stock-option profits. Some trades, he
told the court, were possibly illegal. Then came former chief
financial officer Robin Szeliga. She said she warned Nacchio
not to confirm bullish financial projections in 2001. They once
argued by phone. "Just hang up and get some sleep," Szeliga
quoted Nacchio. "You'll see what I decide in the morning."
A couple months before that 3 a.m. conversation, Szeliga netted
$125,000 in stock option profits. That's meager by Qwest
standards. But she needed the money for a home remodeling
Szeliga pleaded guilty to insider trading and received two years
probation, six months home detention and a $250,000 fine. She
also agreed to pay $577,000 to the Securities and Exchange
Commission and is barred from being a director or officer of a
public company. And all she wanted was a new kitchen. Well, at
least she's not in prison. Now she can enjoy it.
Other former Qwest executives testifying against Nacchio
included former finance vice president Grant Graham, who copped
a felony plea after a trial that ended in a hung jury; and mark
Schumacher, former Qwest controller, who paid $40,000 to settle
with the SEC.
The smartest guy in the courtroom may have been Greg Casey, who
formerly headed Qwest's wholesale business unit. Casey paid
$2.1 million to settle charges with the SEC. But before he left
Qwest in 2001, he cashed $25 million in stock options. By the
time this saga is over, Casey may have emerged richer than
Nacchio from the ashes of Qwest.
Afshin Mohebbi, former Qwest president, had $8 million worth of
stock options in January 2001, but never cashed out. The
soft-spoken executive said he often communicated with Nacchio by
slipping a memo on his chair. "I felt much more comfortable
writing, expressing myself in works," he said.
Mohebbi the meek was one of the more credible witnesses, but he
left the jury hanging on a key point. He'd written a memo to
Nacchio in 2001 warning of a "huge stretch" in Qwest's numbers.
but Mohebbi never clarified whether he meant a "huge stretch" in
Qwest's internal budgets, Qwest's publicly stated financials, or
both. Nacchio's lawyers argued the memo only refers to internal
numbers that are irrelevant to the case.
Mohebbi has been granted criminal immunity, but still faces SEC
charges for allegedly helping fake $3 billion in revenue.
Not even Catholic Abbot Giles Hayes, called as a defense
witness, was credible.
Hayes testified that he was with Nacchio in Kentucky, giving
Christmas gifts to poor children, when Mohebbi put his "stretch"
memo on Nacchio's chair.
I guess white-collar defendants are complicated. One day they
are in Appalachia giving gifts to poor kids, the next they are
in Colorado allegedly committing accounting fraud and insider
Hayes never had to answer a prosecutor's question of whether
"good people can do bad things" because the defense objected.
Hayes also told the court he runs a private school, where
Nacchio donated $1 million and paid $16,000 annual tuitions for
each of his two sons.
Hayes testified that Nacchio was in an area with no cellphone
access. But on cross examination, he conceded that Nacchio had
access to a satellite phone. Hayes also testified he didn't
know that Nacchio had used the trip for publicity, culminating
in newspaper articles. "I never saw that publicity," Hayes
said, "but I suppose it could have been used."
I think it's going to be a struggle for the jury to believe
anyone in this case.
Al Lewis' column appears Sundays, Tuesdays and Fridays.
Respond to Lewis at denverpostbloghouse.com/lewis, 303-954-1967