Judge asked to delay
SEC willing to give time for criminal probe
By Greg Griffin and Ross Wehner, Staff Writers
Wednesday, July 27, 2005
Federal prosecutors want a judge to suspend the U.S. Securities and Exchange Commission civil lawsuit against former Qwest chief executive Joe Nacchio and other former phone company executives for five months while their criminal investigation continues.
Legal experts disagreed Tuesday over what the development says about the progress of the U.S. Department of Justice criminal probe against Nacchio and others.
"The (Justice Department) doesn't want anything the SEC is doing to in any way slow it down or create objections in court. This is a good indication that the criminal case is coming together," said Brad Lam, a former SEC attorney who has a private law practice in Denver.
But former federal prosecutor Tony Leffert, an attorney with Robinson, Waters & O'Dorisio, said the move doesn't shed light one way or the other on the Justice Department's progress.
Both attorneys agreed that the move has strategic importance for prosecutors in obtaining and protecting testimony from witnesses, which would be critical in a criminal trial.
Justice said in a filing in federal court in Denver on Tuesday that the SEC case - which alleges fraud and insider trading at Qwest between 1999 and 2002 - threatens to undermine its investigation of Nacchio and others.
The criminal probe heated up recently when former Qwest chief financial officer Robin Szeliga pleaded guilty to a felony charge of insider trading and agreed to cooperate in the investigation. Prosecutors have reached agreements with two other former Qwest executives, Grant Graham and Thomas Hall, who are cooperating.
The Justice Department said that "sensitive information" gathered in its investigation could be disclosed through the civil case filed by the SEC in March. It is asking the court to suspend the discovery process, in which parties gather information and depose potential witnesses.
"The Justice Department is taking precautions to ensure the criminal investigation moves forward uninhibited," said Jeff Dorschner, spokesman for the U.S. attorney's office in Denver.
The SEC said Tuesday it does not object to Justice's motion to suspend discovery in its case. Justice said Tuesday that Nacchio did not object to its motion to suspend discovery, but he requested that he be given access to documents secured by the SEC, as well as transcripts of SEC investigative testimony. Justice will allow Nacchio and others access to these materials.
A Nacchio representative declined to comment Tuesday. Nacchio has denied wrongdoing.
U.S. District Magistrate Judge Craig Shaffer of Denver may decide on whether to grant Justice's motion today during a 1:30 p.m. hearing. Discovery wasn't scheduled to begin in the suit until late September at the earliest.
The SEC sued Nacchio and other high-ranking former Qwest officials in March, accusing them in a civil complaint of booking $3 billion in bogus revenue between 1999 and 2002. The case revolves around allegedly improper accounting of one-time fiber-optic network sales as recurring revenue.
As part of that investigation, former Qwest official Gregory Casey agreed Tuesday to pay $2.1 million to settle civil charges against him.
Staff writer Greg Griffin can be reached at 303-820-1241 or email@example.com.
Staff writer Ross Wehner can be reached at 303-820-1503 or firstname.lastname@example.org.