Former Qwest Chief Gets 6-Year Prison Term
Nacchio to Pay $71 Million in Insider-Trading Case
By Carrie Johnson, Staff Writer
Saturday, July 28, 2007
Joseph P. Nacchio, the former chief executive of
Qwest Communications International, was sentenced to six
years in federal prison, a
Denver judge ruled yesterday in capping a lengthy
investigation into questionable stock trades.
As part of the sentence, Nacchio was ordered to pay a $19
million fine and forfeit $52 million in profit from stock sales
he made at a time when prosecutors contend he knew Qwest was
headed for a financial downturn.
Nacchio, 58, signaled he will appeal the ruling by U.S. District
Judge Edward Nottingham.
Word of Nacchio's sentence comes three months after a Denver
jury convicted him of 19 counts of insider trading based on
sales he made from April to May 2001. The jury acquitted Nacchio
on 23 more criminal counts. Nacchio did not testify during the
trial, and he remained silent yesterday on the advice of lawyers
as the judge heaped blame on him.
"The crimes the defendant has been found guilty of are crimes of
Nottingham said, according to a
Bloomberg News report. "The defendant cannot but have
condoned a culture in which this could have occurred."
The judge also rejected a defense request that would have
allowed Nacchio to remain free pending the outcome of his
appeal. Instead, he must report to prison shortly after
authorities determine where he will serve the bulk of his
sentence. Under federal rules, inmates generally serve 85
percent of their sentence, so Nacchio would likely serve a
little more than five years.
Prosecutors led by Assistant U.S. Attorney Cliff Stricklin had
sought a maximum prison term of slightly more than seven years
for Nacchio. But the judge granted him a measure of leniency.
A. Jeff Ifrah, a District lawyer and author of a book on
sentencing policy, said Nacchio's prison term affirms that
federal judges continue to use "advisory" guideline ranges to
formulate punishment for defendants even though the law may give
them more leeway.
Qwest, a Denver company that provides telephone service to
consumers across the western United States, suffered a
substantial stock dive as telecommunications companies took on
increased debt and experienced less demand for their services in
the early 2000s. Retirees and other investors, some of whom
crowded into the Denver courtroom yesterday, lost billions of
dollars even as Nacchio profited from his stock sales.
Defense lawyer Herbert Stern has argued in court papers that the
judge erred by not moving the trial outside
Colorado, where emotions had been inflamed because of
widespread financial losses among residents who had owned Qwest
stock or had worked there. That contention and questions about
the public statements Nacchio made to analysts around the time
of his stock sales may form the backbone of his appeal.
Nacchio, the latest in a string of convicted former chief
executives, including leaders of
Adelphia, still must face a civil case filed by the
Securities and Exchange Commission.
SEC officials previously reached financial settlements with the
company and other former Qwest executives. In the coming months,
they will begin returning $267 million to people who bought
Qwest stock from July 1999 to July 2002.