Prosecutor Denies Claims Case Is Erroneous
By Shawn Young
The Wall Street Journal
Friday, February 24, 2006
A federal prosecutor said his 42-count insider trading
indictment against former Qwest Communications International
Inc. chief Joseph Nacchio is solid enough to withstand Mr.
Nacchio's claim that it is so flawed it should be dismissed.
In a filing with U.S. District Court in Denver late Friday,
U.S. Attorney William Leone defended the indictment against
defense claims in filings earlier this month that the
charges were too vague, were riddled with legal errors and
didn't provide enough information about the crimes Mr.
Nacchio allegedly committed.
Mr. Nacchio was indicted in December on insider-trading
charges stemming from $101 million in sales of Qwest stock
he made in 2001, when he allegedly knew the Denver-based
phone company wasn't doing as well as he claimed. Each
count carries a potential penalty of 10 years in jail. The
government also seeks $101 million in penalties, reflecting
the face value of the stock Mr. Nacchio sold that year.
Mr. Leone disputed claims by Nacchio attorney Herbert Stern
that the negative information Mr. Nacchio had was highly
speculative and not material. "The government will
introduce evidence that Qwest's actual recurring revenue
performance was far below the plan announced to the public
while the defendant was selling his stock and that the
defendant knew it," Mr. Leone said in his filing.
He said his charges meet all legal requirements for
specificity and dismissed the defense's claims as a legally
flawed attempt to get information the government isn't
required to provide.
Qwest, a star of the late 1990s technology and
telecommunications boom, ultimately restated $2.5 billion in
revenue and $2.2 billion in earnings for 2000 and 2001, the
year the accounting problems began to emerge. Mr. Nacchio
was forced out of his post in 2002 as the accounting scandal
Neither Mr. Nacchio nor any other former Qwest executive
faces criminal charges of falsifying the company's books,
though Mr. Nacchio and former Qwest executive Afshin Mohebbi,
along with other former executives, face civil fraud charges
from the Securities and Exchange Commission. Mr. Mohebbi,
who had been promoted to president, has been given immunity
from prosecution and is expected to be an important witness
for the government.
Write to Shawn Young at