Nacchio penalties pared
His attorney may appeal the relatively small cuts in prison time and forfeitures.
By Andy Vuong
A federal judge also cut Nacchio's forfeiture amount by $7.4 million, to $44.6 million, as part of a resentencing that an appeals court panel ordered last summer. A fine of $19 million — the maximum of $1 million per count — was left intact.
Nacchio, now 61, reported to a prison camp in
Nacchio attorney Sean Berkowitz, who argued for a term of less than 3 1/2 years, laid the groundwork for another appeal by objecting to many of the judge's findings Thursday.
U.S. District Judge Marcia Krieger sided with a government expert on a key dispute — how much Nacchio benefited financially from the insider information on which he based his illegal stock sales in early 2001.
The appeals court ruled that during the 2007 sentencing, the trial judge miscalculated that amount, which is an important factor in setting the range of the prison term.
A government financial expert said the gain ranged from $23.5 million to $32.9 million based on sharp drops in Qwest stock price after the insider information was disclosed piecemeal to the public over a period of many months after Nacchio's stock sales.
That information related to Qwest's deep reliance on nonrecurring revenue and warnings that the company would miss publicly stated financial targets in 2001.
"He benefited from a stock price that was high," Krieger said. "The public did not."
From January 2001 to July 2002, Qwest stock lost more than 90 percent of its value. Nacchio resigned from Qwest in June 2002.
Krieger noted that such crimes are serious because they "undermine confidence in a free market."
The gain amount, along with other factors, called for a prison term ranging from five years and three months to 6 1/2 years. Krieger said she decided to go with the midpoint.
Nacchio's expert pegged the gain at $1.8 million, but Krieger said that analysis was too narrow.
The trial judge, Edward Nottingham, who has since resigned,
pegged Nacchio's gain at $28 million. But
Assistant U.S. Attorney James Hearty asked for a prison term of 6 1/2 years.
"Joseph Nacchio was an American success story," Hearty acknowledged, but "it appears extreme greed and arrogance took over," leading to his crimes.
Berkowitz asked for mercy, portraying Nacchio as a selfless family man who dedicated his life to Qwest.
"Mr. Nacchio bled Qwest blue," Berkowitz said, a reference to the Denver-based telecommunications company's primary color. "He believed in the company."
Berkowitz declined to comment after the hearing. He has two weeks to file a notice of appeal. He suggested to Krieger that the combined fine and forfeiture of nearly $64 million is about $8 million more than what's allowable.
The forfeiture was cut from $52 million — the gross amount of Nacchio's stock sales — because $44.6 million is the statutory maximum after factoring in fees Nacchio paid to exercise his stock options, according to court filings.
Much of that money will go toward a national victims' assistance fund, said Colorado U.S. Attorney David Gaouette.
"It was an appropriate sentence," he said, adding that the government will defend it if necessary.