AUSWR
The Association of U S West Retirees
 

 

 

Former Qwest Chief Gets 6-Year Prison Term
Nacchio to Pay $71 Million in Insider-Trading Case
By Carrie Johnson, Staff Writer
Washington Post
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 overarching greed," 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 Enron, WorldCom and 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.

http://www.washingtonpost.com/wp-dyn/content/article/2007/07/27/AR2007072701034.html?wpisrc=newsletter