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
"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
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.