AUSWR
The Association of U S West Retirees
 

 

 

Qwest unlikely to recapture Nacchio legal fees
By Andy Vuong
Denver Post
Wednesday, February 25, 2009

Qwest will have a difficult time recovering any of the millions of dollars the company shelled out for Joe Nacchio's defense against insider trading charges, even though the former chief executive's conviction has been upheld, experts say.

"There are a lot of techniques for putting money where other people can't find it or get to it legally," said John Toothman, founder of The Devil's Advocate, a legal fees consulting firm in Great Falls, Va. "Getting the money back from (Nacchio), if he had readily accessible assets, it's tough. Very tough."

In addition to his $1.5 million annual salary, Nacchio profited $176.5 million from selling Qwest stock from 1999 to 2001. He received $10.5 million in severance pay when he was ousted in 2002.

But much of the money may have been transferred to his wife.

In a court filing seeking to freeze Nacchio's assets after his conviction on 19 counts of insider trading in 2007, the government alleged that he transferred $133 million and a house in New Jersey to his wife in early 2002 as his legal problems mounted.

In July 2007, Nacchio was sentenced to six years in prison and ordered to forfeit $52 million in ill-gotten gains and pay $19 million in fines.

Before the sentencing, Nacchio transferred $52 million into three escrow accounts to be overseen by a federal court as part of a deal with prosecutors.

The final tally on Nacchio's legal tab will be in the the tens of millions of dollars, ranking it among the most expensive white collar criminal defenses, Toothman said.

Former Enron CEO Jeff Skilling, who was convicted of fraud and conspiracy in 2006, reportedly rang up $65 million in legal fees.

Nacchio was indicted on the criminal insider trading charges in 2005 after a years-long investigation. Pretrial hearings lasted more than a year and his trial took a month to complete. His lead trial attorney, Herb Stern, was regarded as one of the top defense attorneys in the country when he was hired by Nacchio in 2005.

As required by its corporate bylaws, Denver-based Qwest advanced Nacchio's legal fees leading up to and during the trial.

Under an agreement reached with Nacchio after the conviction, the company paid some of his costs during the appeal. Those payments were backed by a $6.5 million letter of credit from Nacchio.

Recruited to Qwest in 1997 by founder Philip Anschutz, Nacchio led the upstart telecommunications company through tremendous growth, fueled largely by its merger with US West in 2000. Qwest nearly crashed into bankruptcy at the end of his tenure in 2002 amid the tech downturn and news of questionable accounting. The company later restated $2.5 billion in revenue booked from 2000 to 2002.

Andy Vuong: 303-954-1209 or avuong@denverpost.com

http://www.denverpost.com/business/ci_11782574