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Nacchio gets 6 years in prison, must pay $71 million; bail denied
By Jeff Smith
Rocky Mountain News
Friday, July 27, 2007

Federal Judge Edward Nottingham today sentenced former Qwest CEO Joe Nacchio to six years in prison for his conviction in the largest insider-trading case in U.S. history. Nacchio, convicted of 19 counts of insider trading, also was fined $19 million and ordered to forfeit within 15 days the $52 million he made from illegal stock sales.

Nacchio's motion for bail pending appeal was denied, and he was given 15 days to report to prison. He asked to speak to the court after sentence was pronounced, but Nottingham would not allow it in a dramatic conclusion to the hearing.

Nacchio was whisked away from the courthouse in a white Chevy Suburban about 20 minutes after the hearing ended. He did not speak to reporters.

Nottingham said Nacchio should serve his sentence at the Schuylkill Federal Correctional Institution in Minersville, Pa., which houses both a medium-security facility and a minimum-security camp. Nacchio had requested that if sentenced he be housed in the camp at Schuylkill, but the Federal Bureau of Prisons will make the final determination on where he is incarcerated.

The Schuylkill prison is about 46 miles north of Harrisburg, Pa., and 175 miles north of Washington, D.C.

Nacchio's prison time would be followed by two years of supervised release.

A jury in Denver found Nacchio guilty in April of insider trading for stock sales he made in April and May 2001.

After his sentence was announced, Nacchio stood up, pointed to his appellate attorney and said "I'm going to say something."

He walked toward the judge's bench, and said "I'm going to address the court. I'm the defendant. I promise it will be respectful."

Nottingham cut Nacchio off, saying he had the opportunity to make a statement earlier. He then ended the hearing.

Nacchio was consoled by his youngest son, Michael, and his wife, Anne Esker, after sentencing.

Nottingham said Nacchio committed "crimes of overarching greed" when he profited from sales of Qwest stock even as he knew the company was in financial trouble. "He took this job ... because he couldn’t turn it down.

"He couldn’t turn it down because it was too much money."

Troy Eid, U.S. Attorney for Colorado, said "The sentence proves no one, no matter how wealthy, is above the law."

"This is what the American criminal justice system is all about," Eid said. "Justice worked here."

Cliff Stricklin, lead prosecutor for the government, said the top priority for the government is getting the money Nacchio was ordered to forfeit into the victims' hands. The $52 million will be held in a trust pending Nacchio's appeal of his conviction.

How the cash will be distributed to Qwest shareholders who lost money has not been determined, but it could be distributed through a fund already set up by the SEC.

In his sentencing statement, Nottingham said some have suggested that Nacchio recently has engaged in "borderline alcohol abuse." But he said Nacchio has been under stress and doesn't think special conditions should be attached to address the issue.

Nottingham said Nacchio is to be commended for his acts of charity to his family and others, but said he didn't find them to be extraordinary. He said charitable works are expected of someone with so much wealth.

The judge also said there's no question Nacchio's oldest son David is ill and that Nacchio has been a wonderful father. But he noted that Nacchio also deprived his son when he decided to take the job at Qwest in Colorado, though he lived in New Jersey.

Nacchio's legal team, led by Herbert Stern, had argued their client should avoid jail time because of his son's health and because of health issues involving Nacchio's elderly mother.

"I bet you anything" that Nacchio wishes he walked away from Qwest in early 2001, Nottingham said, but the fact was that he didn't, instead negotiating a new contract.

Stricklin this morning said the government asked for a sentence of seven years and three months, on the "high end" of the sentencing range, and said it considered seeking an even higher sentence.

"This is not for a pound of flesh or retribution," Stricklin said, but noted the seriousness of the offense, Nacchio's responsibilities as leader of Qwest, and the "devastating consequences" when the company lost credibility.

"Joe Nacchio was Qwest," Strickin said.

Prosecutor Colleen Conry, arguing against leniency in sentencing, said there are other capable people to care for David Nacchio, who has emotional issues. David Nacchio has a "wonderful mother trained in these issues" and a "top-notch psychiatrist."

Joe Nacchio was emotional when his sentence was read, wiping tears with a handkerchief. He had cried earlier during discussions about his family.

Stern argued earlier in the morning that there was no "rational" basis to calculate that the former CEO's stock gains totaled $52 million. That was the gross proceeds from his illegal stock sales in April and May 2001.

At most, Stern said, Nacchio's gains were $28 million after option costs and taxes. Nottingham accepted that number, which was used in determining sentence.

http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5647715,00.html