Nacchio's not likely to cave in court
By Al Lewis,
Tuesday, December 6, 2005
If the government brings a criminal indictment against
former Qwest CEO Joe Nacchio, he's not going to fall apart
like other indicted executives.
He won't boldly proclaim ignorance and cry when nobody
believes him, like former WorldCom CEO Bernie Ebbers.
He won't freak out like former Enron CEO Jeffrey Skilling,
who reportedly had too many drinks in a Manhattan bar in
April 2004 and started accusing other patrons of being
Nor will Nacchio suddenly get religion and start preaching
on the church circuit, like HealthSouth's Richard Scrushy.
If indicted, it's a safe bet Nacchio will keep on being his
overconfident self -- countering every allegation with an
explanation, apologizing without really apologizing, and
fighting like a guy from New Jersey. In this sense, he
would be more like Martha Stewart than any other recent
well-known white-collar defendant -- only without the fan
Nacchio recently hired former federal prosecutor and judge
Herbert Stern for his defense. Stern was lauded in a 1973
book, "Tiger in the Court," for his campaign against
political corruption in New Jersey. Stern is also the
author of a set of books called "Trying Cases to Win."
Hiring Stern may indicate that Nacchio is preparing for an
insider-trading indictment. But it's not a foregone
conclusion that Nacchio would be convicted. Insider-trading
cases are difficult to prove -- and this case already has
prosecutors facing a tough challenge.
Nacchio made $176.5 million selling Qwest stock between 1999
and 2001 as he and others fraudulently reported billions in
revenues at Qwest, according to civil charges in March by
the Securities and Exchange Commission.
To make insider trading charges stick, the U.S. Attorney's
office will have two easy parts and one hard one. The easy
parts are to show when Nacchio sold his stock and what he
told the public as he sold his stock (both a matter of
record). The hard part is to prove what he actually knew
about Qwest's financial condition as he sold stock and made
public statements (a matter of conjecture).
For this third prong of the case, prosecutors have put the
squeeze on potential witnesses. They've reportedly lined up
Qwest's former chief operating officer, Afshin Mohebbi, who
may have been granted immunity in exchange for testimony.
And they've got former chief financial officer Robin Szeliga,
who awaits sentencing after pleading guilty to insider
For Legal Team Nacchio, casting doubts on these witnesses'
testimony will be key, and it won't be impossible because
both Mohebbi and Szeliga have a lot to gain by turning on
their former boss.
Nacchio's lawyers may argue that Nacchio sold his stock on a
prearranged schedule. They may point to financial advisers
who told Nacchio to divest because he had too much wealth in
Qwest stock. They'll say he cashed stock options because
they were expiring.
Nacchio's defense also will argue that he believed Qwest's
future was bright when he sold his stock. According to The
Wall Street Journal, Nacchio's lawyers may argue that
Nacchio believed Qwest was in line to receive lucrative
contracts from the federal government -- secret, national
security contracts that only people near his level would
"It's the Alice in Wonderland defense," said Anthony
Accetta, a Denver fraud investigator who served as
Colorado's first assistant attorney general in Colorado in
the '70s. "He's using inside information to justify using
It does smack of a certain bravado -- the kind for which
Nacchio is renowned. Count on Nacchio to stick to the same
story he's been telling for years.
"At any time I sold Qwest stock, I believed that the
company's financial statements represented a full and
accurate picture of its financial condition," Nacchio told a
congressional panel in 2002. "I regret that I was unable to
complete the job of building Qwest into the global
telecommunications leader we had envisioned, and I am truly
sorry for any losses suffered by Qwest shareholders and for
the thousands of Qwest employees who lost their jobs."
Sorry, yes. But unless prosecutors, regulators and lawyers
for aggrieved shareholders succeed, he's keeping the money.
Al Lewis' column appears
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