Nacchio conviction reversed
By Andy Vuong
Monday, March 17, 2008
Article Last Updated: 03/17/2008 11:53:08 AM MDT
The 10th Circuit Court of Appeals has reversed the guilty
verdict in the insider trading case of former Qwest CEO Joe
Nacchio and ordered a new trial before a different judge.
The decision was 2-1 to overturn the verdict.
After a month-long trial in
federal court, Nacchio was convicted in April 2007 on 19 counts
of insider trading connected to his sale of $52 million in Qwest
stock. He was acquitted on 23 other charges.
He was sentenced to six years in a prison and ordered to forfeit
the $52 million in ill-gotten gains and pay $19 million in fines
— $1 million per count.
U.S. District Court Judge Edward Nottingham presided over the
District Court trial.
Nacchio, 58, argued on appeal that he should be granted a new
trial because of flawed jury instructions, the wrongful
exclusion of a defense expert witness and rulings related to his
classified information defense. He also contended that the
case should be thrown out because there was insufficient
evidence for conviction. During oral arguments in the
appeal in December, the judges focused on the exclusion of
expert testimony and whether the inside information Nacchio sold
stock on the basis of was "material," or important enough that
he was legally required to disclose it to the public.
Prosecutors showed during trial that Nacchio received repeated
warnings from several of his top lieutenants about Qwest's
deteriorating financial condition in 2000 and 2001. Many
of them, including former president Afshin Mohebbi and former
CFO Robin Szeliga, testified that beginning late 2000 they told
Nacchio that it would be a huge stretch for Qwest to hit 2001
Nacchio kept their concerns private while accelerating his sale
of company stock in early 2001, the government charged. At
the same time, Nacchio kept reassuring investors that the
company would hit its publicly stated financial targets.
The defense argued the warnings Nacchio received were related to
Qwest's internal budgets and thus did not have to be disclosed
to the markets. His attorneys also contended that Nacchio
was too consumed with the mental health of his oldest son to
plot such a crime. It was revealed during trial that David
Nacchio attempted suicide in early 2001, nearly pushing his
father to resign from Qwest.
Qwest founder Philip Anschutz, who handpicked Nacchio to lead
the fast-growing startup in 1997, testified that he talked
Nacchio out of resigning.
The aggressive Nacchio had spearheaded a spectacular takeover of
US West in 2000, which transformed Qwest from startup into one
of the country's largest telecommunications companies.
Qwest, however, nearly collapsed into bankruptcy in the summer
of 2002 amid an accounting scandal and the tech downturn.
Nacchio was ousted in June 2002. Qwest later restated more than
$2 billion in revenue booked under his watch.
Nacchio didn't take the stand in his defense. He
maintained an upbeat presence publicly throughout much of the
trial and sometimes took notes during testimony. He welled
with emotion whenever his son's mental illness was discussed.
Nacchio was given the opportunity to address the court before
his sentence was handed down in July, but declined. At the
end of that hearing, Nacchio made a bizarre attempt to speak,
only to be rebuffed by the judge.
Andy Vuong: 303-954-1209 or