The Association of U S West Retirees



Nacchio 'hid' assets, adviser may testify
Defense moves to forbid evidence of transfer to wife
By Sara Burnett
Rocky Mountain News
Thursday, March 29, 2007

Prosecutors plan to call Joe Nacchio's financial adviser to testify today that the former Qwest CEO tried to "hide" $90 million in assets by moving them into his wife's name in 2005.  Adviser David Weinstein's testimony would show that Nacchio, charged in federal court with 42 counts of insider trading, knew the assets were "ill-gotten gains" and that he had done something wrong, Assistant U.S. Attorney Kevin Traskos wrote in a motion filed Wednesday in U.S. District Court.

"In other words, his transfers were motivated by Defendant's desire to take dramatic action to avoid suffering a loss -- which bears strong similarity to the desire that motivated his insider sales," Traskos wrote.

It's possible, however, that Weinstein will not be allowed to take the stand.

Nacchio's attorneys filed a motion objecting to the testimony, and U.S. District Judge Edward Nottingham -- who had not ruled as of late Wednesday -- could find it is not relevant to the case and would unnecessarily prejudice the jury against Nacchio.

In his filing opposing the testimony, defense attorney John Richilano called the prosecutors' motion "strained logic," saying they have not shown that Nacchio transferred the assets to his wife's name because he knew about or suspected he would be a target of a criminal investigation.

"The asset transfer evidence has nothing to do with the charges in this case," Richilano wrote.

He also said the government "badly misinterprets" the defense's opening statement, in which attorney Herbert Stern told jurors that Nacchio gave 90,000 shares of Qwest stock to his children in 2000.

Prosecutors say the defense made the statements to show "good faith" on Nacchio's part, or that he was a generous family man.  By doing so, prosecutors say, the defense opened the door to further testimony about Nacchio's motives in moving assets.

Christopher Bebel, a Houston-based lawyer and former federal prosecutor not involved in the Nacchio case, said he believes the government will "win this battle."  But he said the judge may limit the testimony Weinstein can offer.

Phil Weiser, a law professor at the University of Colorado, said the testimony appears to be potentially "powerful" evidence, though the government must demonstrate it is germane.

"There's a lot of character evidence they'd like the jury to be influenced by, but the job of the court is to make sure it's truly relevant, not just about whether he was a good guy or a greedy guy," he said.

According to property records, Nacchio's wife, Anne Esker, bought a home in Florida for $9.5 million in July 2005.  Florida has a homestead law that makes it virtually impossible for creditors to seize someone's primary residence.  The state also doesn't have a personal income tax.

Dueling memorandums

  Prosecutors are trying to call Joe Nacchio's financial adviser to the stand.  Because defense counsel advertised Nacchio's "good faith" in opening statements, prosecutors say they can call David Weinstein to demonstrate that Nacchio tried to hide $90 million in assets.

  The defense countered in a memorandum of its own that the government was using "strained logic" and that its opening statement illustrated only that Nacchio sold the stock options that he had to.  The judge will decide whether Weinstein can testify.


  Grant Graham, former finance executive of the global business division, said the division's 2001 targets were a "huge stretch" and "not realistic."

  Former Qwest controller Mark Schumacher said he recommended to former CFO Robin Szeliga that Qwest disclose the amount of its one-time sales of network capacity for the first quarter 2001.  But Schumacher acknowledged he didn't raise the issue with the company's general counsel or with the board of directors or its audit committee.

  Prosecution and defense played video clips of Joe Nacchio from a meeting in Las Vegas in January 2001 designed to motivate sales employees.  In the prosecution's clip, Nacchio declares:  "It's pretty simple.  Everything starts with meeting your financial objectives."  In one of the defense's clips, Nacchio tells the sales employees that they had an "amazing challenge in front of (them)."

  Gregory Casey, former head of wholesale markets, said he didn't recall Nacchio killing a $200 million fiber-optic capacity swap with Enron around May 2001.  Defense tried to show that if Nacchio cared so much about making the financial targets, he wouldn't have killed the deal.  The issue could come up again.


  Mark Schumacher, former Qwest controller, is back on the stand this morning.  He is expected to be followed by another former Qwest executive, perhaps James Smith, who was executive VP of national consumer markets.


"(Nacchio had a) desire to hide his assets to avoid suffering a loss, which bears strong similarity to the desire that motivated his insider sales several months before."

Kevin Traskos, prosecutor, in a motion by the government made public Wednesday

"To be asking every salesperson to sell 17 instead of 10, and then sell products they weren't familiar with, was unrealistic."

Grant Graham, former vice president of Qwest's global business unit, saying he told Nacchio the unit didn't have enough salespeople to meet its goals or 303-954-5343. Staff writers James Paton and Jeff Smith contributed to this report.,2777,DRMN_23910_5450163,00.html