Nacchio's Sales Goals Scrutinized in Trial
Ex-Finance Chief Testifies as Defense Asks for a Mistrial
The Wall Street Journal
Tuesday, March 27, 2007
DENVER -- Joseph Nacchio, the former chief
executive of Qwest Communications, International Inc., told
managers of the telephone company's key business units to focus
on meeting internal business targets despite their concerns they
would be unable to achieve the goals he set for them, a former
chief financial officer of the company testified yesterday.
In a separate development, Mr. Nacchio's attorneys asked the
judge presiding over his insider-trading trial to declare a
mistrial because of what they called "prejudicial" testimony
from a former Qwest employee who described putting all of her
investments into Qwest stock based on Mr. Nacchio's promises of
Robin Szeliga, who joined Qwest in 1998 and became chief
financial officer in April 2001, told jurors she attended
several meetings were Mr. Nacchio put a priority on meeting
internal revenue targets, which were higher than those released
Ms. Szeliga, who is serving two years' probation after pleading
guilty to illegally selling stock in 2001, said she met with Mr.
Nacchio and her boss, then-finance chief Robert Woodruff, in
late December 2000 or early January 2001 to discuss concerns
raised by executives of Qwest's business units.
"I explained to Mr. Woodruff and Mr. Nacchio that business units
were still concerned, very concerned, that they could not meet
the targets assigned to them," she said.
Ms. Szeliga said Mr. Nacchio told her "he would make the
decision, not me, as to whether the business units had valid
concerns." The meeting occurred about a month before the first
trades that Mr. Nacchio is accused of improperly making.
Sally Anderson, a former regional training manager for Qwest and
merger partner U S West, Inc., told jurors last week that she
put all of her savings into Qwest stock after receiving an
e-mail from Mr. Nacchio in the fall of 2000 in which he said the
company was raising revenue targets.
Ms. Anderson said she became a government witness after
receiving an e-mail from a friend that asked for volunteers who
"lost a lot of money on Qwest stock."
U.S. District Judge Edward Nottingham had told prosecutors to
limit Ms. Anderson's testimony to that of what a typical
investor would find important and to statements made by Mr.
Nacchio to employees.
In their motion, defense attorneys contended that Ms. Anderson's
statements went beyond the limits when she explained how she had
divided her holdings. Prosecutor Cliff Stricklin told Judge
Nottingham yesterday that government lawyers would file a
response within a couple days.
Ms. Szeliga testified that she received a memo Sept. 5, 2001,
indicating that business unit managers believed they would fall
$1.5 million short of meeting their 2001 budget revenue estimate
of $22 billion. She said in the 2001 budget they had expected
growth of $2.6 billion to $2.7 billion.
The government's case is grounded in 2000 and 2001, when Qwest
acquired former Baby Bell U S West.
Federal regulators say Qwest falsely reported sales of capacity
on fiber-optic cables as recurring instead of one-time revenue
between April 1999 and March 2002. That allowed the company to
improperly report approximately $3 billion in revenue, which
helped pave the way for its 2000 acquisition of U S West, the
Securities and Exchange Commission has charged.