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Ex-Qwest execs face civil trial in 2009
Magistrate lays out deadlines in fraud case filed by SEC
By Jeff Smith
Rocky Mountain News
Saturday, July 21, 2007


The government's civil fraud suit against five former Qwest executives, including former CEO Joe Nacchio, won't go to trial until 2009 based on the latest schedule issued by a federal magistrate Friday.  U.S. Magistrate Judge Craig Shaffer set late 2008 deadlines for the exchange of evidence and remaining matters to be resolved beginning in January 2009.

The defendants and federal regulators have identified 201 people they want to interview, or depose, including 82 listed by Nacchio's defense team.  Only 15 depositions have been completed.

While a trail isn't likely before 2009, the order indicated the parties have "considered the possibilities for a prompt settlement" and said settlement discussions may continue.

Shaffer's scheduling order came a week before Nacchio is to be sentenced on 19 counts of insider trading in a separate criminal case.

The civil fraud suit was filed by the Securities and Exchange Commission in March 2005.

The SEC alleges Nacchio and the other defendants orchestrated or participated in a $3 billion financial fraud between 1999 and 2002.

The defendants include former Qwest Chief Operating Officer Afshin Mohebbi, former Chief Financial Officer Robert Woodruff and former Qwest accountants James Kozlowski and Frank Noyes.

Former Chief Financial Officer Robin Szeliga and former sales executive Gregory Casey settled with the SEC.

Qwest, under current CEO Dick Notebaert, eventually erased more that $2.5 billion of revenue from its 2000 and 2001 books.

Shaffer's scheduling order noted the SEC objected to Nacchio listing 80 witnesses that "no other party considers relevant to this case."

Shaffer responded "it is not fair or just" for the SEC to bring complex claims against Nacchio and then claim it "lacks the resources" to attend the depositions.

Nacchio's defense attorneys have suggested they will make classified government contracts an issue in the civil fraud case.  They floated the same strategy in the criminal case, but the issue didn't come into play, in part because Nacchio didn't testify.

Nacchio has argued he was optimistic about Qwest's financial condition because he alone possessed information that the company was poised to land hundreds of millions of dollars of lucrative classified contracts.

Shaffer wrote he understands that Nacchio wishes to interview people "whose testimony may implicate the 'state secrets' doctrine and the Classified Information Procedures Act."

He said he isn't taking a position now on how that would be done but expects Nacchio to "promptly" contact government agencies that may have an interest in the matter.

smithje@RockyMountainNews.com or 303-954-5155

http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5639059,00.html