The Association of U S West Retirees



Nacchio's Sales Goals Scrutinized in Trial
Ex-Finance Chief Testifies as Defense Asks for a Mistrial
Associated Press
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 revenue growth.

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 to investors.

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.