AUSWR
The Association of U S West Retirees
 

 

 

Nacchio gets 6 years
Judge also orders ex-Qwest chief to forfeit $52 million profit, plus fines
By Sandy Shore, AP
St Paul Pioneer Press
Saturday, July 28, 2007

DENVER - Joe Nacchio stood quietly in a packed courtroom Friday as a judge told the former Qwest Communications chief his $52 million in illegal stock sales represented crimes of "overarching greed" and ordered him to prison for six years.

With Qwest shareholders and retirees among those watching, U.S. District Judge Edward Nottingham also said Nacchio must forfeit $52 million in assets -- representing his profit on the sales -- plus fines and assessments totaling $19.2 million.

After the sentence was read, Nacchio nodded briefly toward his wife, Anne, and son Michael.  He did not comment as he, his family and attorneys left the courthouse and rode away in SUVs that had been waiting out front.

"That is great news," said Steve Lewsader, president of St. Paul-based Local 7201 of the Communications Workers of America, representing 1,050 of Qwest's 3,500 unionized workers in Minnesota.  "That will bolster the spirits of my members and all the people who he hurt."

Denver-based Qwest is the largest phone company in Minnesota.  Its legacy here goes back through the former US West and before that Northwestern Bell;  many of its retirees in Minnesota were hurt financially by Nacchio's crimes.

Nacchio has vowed to appeal his conviction.

After the hearing, U.S. Attorney Troy Eid said the Nacchio case was the largest insider-trading lawsuit filed in the nation based on the number of counts, the amount of money involved and, now, the length of prison term.

"Justice worked here," he told a crowd of reporters and onlookers in Denver.  A former ATT executive, Nacchio, 58, is the latest in a string of former top-level executives to be convicted in corporate fraud scandals at companies like Enron and WorldCom.  He had faced a maximum of seven years, five months in prison.

The criminal case grew out of the accounting scandal in which regulators said Qwest Communications International Inc. falsely reported fiber-optic capacity sales as recurring instead of one-time revenue between April 1999 and March 2002.  The practice allowed what was then an upstart Denver-based telecom to improperly report about $3 billion in revenue and helped it acquire US West Inc. and its services territory, the regulators said.

Nacchio was indicted in December 2005.

He was charged with 42 counts of insider trading for stock sales completed in the first five months of 2001 when managers warned Qwest faced financial risks because it was relying on money from one-time sales to meet revenue targets but the information was concealed from investors.

A jury deliberated six days in April before acquitting Nacchio on 23 counts and convicting him on 19 transactions that occurred in April and May 2001 after Qwest released its 2001 first-quarter results without commenting on the revenue situation.

Thousands lost money as Qwest's stock price plummeted from more than $60 a share in 2000 to just $2 a share in 2002 and Qwest was forced to restate $2.2 billion in revenue.

"When you consider the number of lives he's disrupted, it's a very light sentence," said Dick Johnson, the 72-year-old chairman of the Northwestern Bell-US West-Qwest Retirees Association.  The association has 2,500 members in Minnesota, and it represents just under 20,000 of Qwest's estimated 48,000 retirees throughout its 14-state territory.

"I was hoping for 10 (years), so I'm somewhat disappointed, but I'm still going to do my happy dance," said Mary Ann Neuman, a New Hope Qwest retiree who lost a quarter of a million dollars.

During Friday's hearing, defense attorney Herb Stern asked the judge to be lenient because Nacchio was a crucial caregiver for his 26-year-old son, David, who attempted suicide a little more than seven years ago and continues to struggle.

Although understanding about the situation, Nottingham refused to consider it saying it did not meet the legal definition of "extraordinary" that would allow him to depart from federal sentencing guidelines.

The judge also denied a defense motion for an acquittal and new trial, dismissing claims that jurors were swayed by damaging pretrial publicity.

Nacchio, who declined a chance to testify before he was sentenced, approached the bench as Nottingham was ready to close the hearing and said he wanted to speak.  But Nottingham said the one-time CEO had his chance and turned it down.  "I promise it will be respectful," Nacchio replied, but the judge refused and recessed the trial.

Staff writer Leslie Brooks Suzukamo contributed to this story.

http://www.twincities.com/business/ci_6482399