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Deposition requested in Qwest civil case
By Andy Vuong
Denver Post Staff Writer

Tuesday, September 5, 2006

 

A civil fraud case against former Qwest chief executive Joseph Nacchio and five other former Qwest officials might advance even before Nacchio's criminal insider-trading case is completed.

 

Two former Qwest accountants charged in the civil case - Frank Noyes and James Koz lowski - have asked a federal judge to allow them to begin gathering information from people who aren't connected to Nacchio's criminal case. Depositions in the civil case have been stayed since February.

 

There's a "decent chance" the judge will grant their wish, according to a former federal prosecutor who reviewed arguments made by Noyes' and Kozlowski's attorneys in court documents filed last week.

 

"It may be that this civil case has reached a point where some depositions need to proceed in fairness," said William Mitchelson, a former federal prosecutor who now is a white-collar criminal defense attorney with Alston & Bird who is not involved in either case. "If the Department of Justice doesn't object to it, there's a decent chance the judge would consider that."

 

Jeff Dorschner, a spokesman for the U.S. Justice Department in Colorado, declined comment.

 

The Securities and Exchange Commission, which filed the civil suit in March 2005, said in a filing last week that it doesn't oppose lifting or continuing the stay on depositions.

 

The SEC alleges in its suit that former Qwest executives fraudulently boosted revenues by $3 billion from 1999 to 2002. Qwest later restated that revenue. The SEC wants the executives to repay stock-sale profits and, in some cases, salaries.

 

In December 2005, the Justice Department charged Nacchio with 42 counts of illegal insider trading connected to his sales of $100.8 million in Qwest stock in early 2001. The government alleges that he knew at the time that Qwest was in an unstable financial condition. Nacchio faces up to 10 years in prison and a $1 million fine for each count.

 

The stay on depositions was issued based, in part, on the Justice Department's assertion that Nacchio's criminal trial would begin in the fall.

 

But the trial has been set for March 19 and is scheduled to last up to eight weeks. It would be unfair to Kozlowski if the stay was continued until then, his attorney argued in court documents.

 

"Up to now, Mr. Kozlowski's rights have taken a back seat to the demands of the DOJ," the filing states. Kozlowski should "now be given a seat at the wheel."

 

Kozlowski's filing said that "witness memories may be fading and evidence is being lost," citing the January death of former Qwest board member Jordan Haines. Haines served on the company's audit committee.
"There are ample depositions which can be taken immediately without compromising the criminal case," Noyes' attorney argued in a separate filing.

 

To this point, Noyes and Kozlowski have been allowed to request and exchange information and documents only with the SEC.

 

Mitchelson, the former prosecutor, noted that the Department of Justice has already put together a list of "untouchables" who might be called to testify in Nacchio's criminal case. Kozlowski and Noyes aren't seeking to take testimony from the people on that list at this point.

 

In addition to Nacchio, Kozlowski and Noyes, other defendants in the civil case include former Qwest president Afshin Mohebbi and former chief financial officers Robert Woodruff and Robin Szeliga. Several other former Qwest executives who were sued have reached settlements.

 

In court filings last week, Woodruff and Szeliga said the deposition stay should remain.

 

Mohebbi said in a filing that he doesn't oppose lifting the stay, but that he doesn't want depositions to go forward until the SEC provides disclosures "identifying the specific violations with which it is charging" him.

 

In a separate filing, Nacchio said he "takes no position on whether depositions other than his own should proceed at this time."

 

"It's not unusual for the stay to remain in place, unless there's some drastic emergency for the civil case to be resolved," former federal prosecutor Anthony Accetta said. "Civil cases last for years and years anyway."

 

A status hearing for the civil case is scheduled for Sept. 28.

 

Staff writer Andy Vuong can be reached at 303-954-1209 or avuong@denverpost.com
  

 http://www.denverpost.com/business/ci_4286895