Nacchio had weak legal hand, and soon folded
By Rocky Mountain News Editorial
Friday, July 27, 2007
Former Qwest CEO Joe Nacchio held a weak legal hand going into
today’s sentencing hearing, and it soon folded before common
sense and federal sentencing rules. Nacchio’s attorneys had
asked U.S. District Judge Edward Nottingham to order him to
forfeit no more than $1.8 million from his 19 illegal stock
sales, even though they grossed $52 million. In his first big
ruling of the day, Nottingham ordered the former captain of
Qwest to forfeit every dime of the boodle he skimmed from
If the trades were wrong, then their entire value was an illicit
benefit that should be given up — even if some of it had of
course been devoured by transaction costs and taxes.
And so it went, with Team Nacchio’s efforts to minimize his fine
and time in prison being rebuffed in turn by the no-nonsense
We take no pleasure in seeing Nacchio saddled with a six-year
sentence in a federal prison system that these days is far from
the old stereotype of Club Fed. To the contrary. We admire the
attitude of Nelson Phelps, executive director of the Association
of U S West Retirees, who has every reason to gloat but won’t.
He refused to attend Friday’s hearing because, he said, he has
"a philosophy of non-vindictiveness. ... the last thing I need
to do is go down to the courthouse and smile at a guy who has
been taken down."
But Phelps clearly believes, as do we, that Nacchio must pay for
his crimes. And although six years is undeniably tough, it
sends a siren warning to any other CEO inclined to mislead
investors and the public about the state of his company while
profiting from their ignorance.
If the Nacchio case amounted to nothing more than a corporate
chief putting the best possible spin on his firm’s prospects in
a forecast or two that turned out to be wildly wrong, his
conviction and sentence would indeed be travesties. The history
of business may be littered with the ashes of dashed dreams, but
it is also bursting with the improbable triumphs of visionaries
whose confidence seemed utterly wacky to their contemporaries.
But Nacchio, we should remember, was not merely an optimist
whose plans went south. Not only did he rave about the
company’s future at a time when its prospects were increasingly
precarious, he also authorized the use of one-time transactions
to pad the company’s books — and he did all of this while
quietly selling vast amounts of stock to enrich himself.
As federal prosecutor Colleen Conry said in her closing argument
earlier this year, "This is a case about choices" — bad choices,
it so happens, whose bill has just come due.