AUSWR
The Association of U S West Retirees
 

 

 

Nacchio found guilty
By Rocky Mountain News
Thursday, April 19, 2007


Former Qwest CEO Joe Nacchio was found guilty today of 19 counts of insider trading in connection with stock sales he made from January to May 2001.  The verdict from a jury of eight men and four women was announced shortly after 4:30 p.m. today at the federal courthouse in Denver.  The guilty verdicts cover sales of 1.33 million shares in April and May 2001 with gross proceeds of $52 million.

Nacchio was acquitted on the other 23 counts of the 42-count indictment.

"Convicted felon Joe Nacchio’ has a very nice ring to it," boasted Troy Eid, the U.S. attorney for Colorado.

"We certainly will appeal," said defense attorney Herbert Stern.

Nacchio faces a fine of up to $1 million on each count and up to 10 years in prison.  In addition he may be forced to forfeit up to $52 million from his illegal stocks sales.  He left the court with his family and did not comment.

Nacchio faced his family and smiled after the verdict on the first 10 counts was read as not guilty.  His son Michael soon began weeping in relief.

But that mood changed when the verdicts were read for counts 24 through 42:  all guilty.

The jury deliberated for six days before reaching its verdict.  The trial, presided over by Judge Edward Nottingham, lasted four weeks before going to the jury on April 12.

Judge Nottingham has proposed sentencing for Nacchio on July 27 at 9 a.m.  The judge refused a request by Assistant U.S. Attorney Cliff Stricklin to increase
Nacchio’s bail from $2 million to $5 million.

The conviction of Nacchio, 57, caps a U.S. crackdown on corporate fraud that began when Enron Corp. collapsed in 2001.  Hundreds of executives have been convicted,
including four ex-CEOs:  Nacchio, Enron’s Jeffrey Skilling, Bernard Ebbers of WorldCom Inc. and John Rigas, founder of Adelphia Communications Corp.

Nacchio, who was CEO from 1997 to 2002, didn’t testify in his own defense at the trial.  Defense lawyers said he acted in good faith and believed Qwest would
meet the projections after buying US West in 2000. Nacchio sold stock to diversify his portfolio, exercising options due to expire, his lawyers said.

Before the trial, Nacchio said he would present evidence that he believed Qwest would make its revenue forecasts because he alone knew of the company’s chances of securing secret government contracts.  Nacchio never presented such evidence.

During the trial, prosecutors tried to build a circumstantial case that Nacchio knew Qwest's finances were weakening at a time he was accelerating his stock sales.  The prosecution was not allowed to introduce evidence that Qwest, under different management, later erased some of those revenues from its books.

The jury had to whether the evidence showed beyond a reasonable doubt that Nacchio had a "willful intent to defraud" or, as one legal expert put it, "intentionally acted" on nonpublic, insider information.

The trial marked the culmination of a five-year federal investigation into Nacchio's era at the Denver telecommunications firm.  Three former executives — Robin Szeliga, Grant Graham and Marc Weisberg — all pleaded guilty to one felony count each, but no one has served jail time.

Several former executives received immunity from prosecution in exchange for their testimony at Nacchio's trial.

Nacchio’s still has more legal problems.  He still faces civil-fraud charges by the Securities and Exchange Commission, which is seeking $216 million in alleged "ill-gotten gains" from his stock sales.

http://www.rockymountainnews.com/drmn/business/article/0,1299,DRMN_4_5493912,00.html