AUSWR
The Association of U S West Retirees
 

 

 

Cooperation key in prosecution
By Tom McGhee, Staff Writer
Denver Post
Tuesday, December 20, 2005

Even if prosecutors have a mountain of documents that indicate former Qwest CEO Joe Nacchio broke the law they will likely turn to those who worked closely with him to make their case stick.

Accusations of insider trading and other counts that Nacchio faces can be confusing to a jury if there is no witness to explain what was happening at the time an e-mail, memo, invoice or other document was drafted.

"It is hard to make a case totally on the documents ... and a witness, particularly a witness who had actual involvement in the alleged crime, has to be backed up by documents to be completely credible," said John Walsh, a former federal prosecutor in private practice with Hill & Robbins in Denver.

Almost certain to take the stand in any trial is former Qwest chief financial officer Robin Szeliga, who has pleaded guilty to insider trading and agreed to cooperate with the government.

The Justice Department's indictment against Nacchio focuses on insider trading and disclosure issues in 2001 during the time Szeliga oversaw Qwest finances.

"The CFO should be central to the events.  If the CFO doesn't know what is going in a company's finances, who on God's green earth would," said Carr Conway, director of forensic accounting at the Dickerson Group in Lakewood.

Sources close to the case have said Afshin Mohebbi, who was Nacchio's chief operating officer, also is likely to testify for the prosecution, and may have been granted immunity for his cooperation.

If Mohebbi has escaped prosecution in return for taking the stand, he will be a star witness, said Tony Leffert, a former federal prosecutor and attorney with Robinson, Waters & O'Dorisio in Denver, who isn't involved in the case.

"For someone in his position to not be charged or plead guilty to any crime would indicate that he probably has significant evidence about others," said Leffert.

Damaging information doesn't have to come from a defendant's inner circle.  Mid-level support staff, or even a secretary, can sometimes provide it.

The most effective witnesses are those who have had direct contact and direct conversations with a defendant.

One of Nacchio's closest co-workers was former Qwest general counsel Drake Tempest, who reportedly has testified in front of the grand jury against Nacchio.  Tempest joined Qwest in 1998 from the New York law firm of O'Melveny and Meyers.  He returned to the firm in 2002 after Nacchio was ousted by the Qwest board.

Neither Nacchio nor Tempest ever settled in Colorado and the two frequently traveled together on Qwest's corporate jet as they commuted to and from their homes on the East Coast.  As general counsel, Tempest also would have had knowledge of Qwest's inner workings.

Prosecutors wrung an agreement to cooperate from former Qwest senior vice president Thomas Hall, and Grant Graham, the former chief financial officer of the company's global business unit.  The two men were accused of participating in a scheme to improperly inflate Qwest's revenues by $34 million in 2001.

Hall pleaded guilty to a single misdemeanor count of falsifying documents after a jury deadlocked on a broader set of fraud charges.  In exchange, prosecutors dropped three counts of wire fraud and one count of securities fraud.

In the same case, Graham pleaded guilty to one felony count of being an accessory after the fact to wire fraud with reckless indifference.  His plea deal calls for a maximum of one year of probation and a $5,000 fine.

Though they may have cooperated in the DOJ investigation, whether they take the stand may depend on how much they know about the activities that led to the indictment, said Walsh.  "The most effective witness is the one who had direct contact and direct conversations with whoever the defendant is."

The DOJ has indicted one other former Qwest vice president, Marc Weisberg, on allegations that he secretly took $3 million worth of stock from Qwest vendors for himself and others.  Weisberg has pleaded not guilty and legal experts have speculated that investigators are pressuring Weisberg to provide information that would help them prosecute Nacchio.  Prosecutors have said the Weisberg case was an offshoot of the larger Qwest investigation and the two cases aren't closely related in substance.

A number of former Qwest executives also have settled with the Securities and Exchange Commission after they were named in a civil accounting fraud case.  The SEC said their actions allowed Qwest to improperly report approximately $3 billion in revenue that helped clear the way for its 2000 acquisition of U S West.

They are:  Greg Casey, former executive vice president of wholesale market;  former pricing manager Roger B. Hoaglund;  former senior vice president of finance William Eveleth;  former controllers Mark A. Schumacher and Bryan K. Treadway.

Each has agreed to cooperate with the SEC in its investigation of the Qwest case.

But legal experts say that doesn't guarantee they have a similar agreement with the Department of Justice that would make them dependable witnesses.

"You are going to have some grudging cooperation from those folks who have already been through the mill but they are not going to be enthusiastic about it," said Conway.

The SEC has charged two other former executives, James Kozlowski and Frank Noyes, both of whom were accountants, in the same civil accounting fraud case.  The SEC claims the two failed to disclose sales transactions that should have been included in Qwest's financials.

Both deny guilt and have requested the judge dismiss the charges.

Kevin Evans, Kozlowski's lawyer, said unless prosecutors include charges about those transactions, his client is unlikely to be a witness.

Staff writer Tom McGhee can be reached at (303)820-1671 or tmcghee@denverpost.com


http://www.denverpost.com/business/ci_3327465