The Association of U S West Retirees



Buying on Nacchio's say-so
Ex-Qwest employee Anderson testifies she purchased shares based on CEO's e-mail
By Sara Burnett
Rocky Mountain News
Friday, March 23, 2007

Sally Anderson was excited about the e-mail she received from Qwest CEO Joe Nacchio on Sept. 7, 2000.  In it, Nacchio shared some good news:  Qwest, newly merged with U S West, was raising revenue projections for 2000 and 2001.  It was hiring someone to ensure a better customer experience, cutting costs and launching exciting new products, such as digital media.

Anderson, a regional training manager with 28 years' experience at Qwest, U S West and Northwestern Bell, had been putting money into a company savings plan every two weeks for years.  Half of it she put into company stock.

But Nacchio's enthusiasm that day was so contagious, Anderson promptly began putting 100 percent into Qwest, the former employee told jurors during Nacchio's insider-trading trial Thursday.

"I wanted my savings to grow with the company," Anderson said.

Judge Edward Nottingham forbade prosecutors from questioning Anderson about whether she lost money and if so, how much.  Their questioning was limited to the idea that Nacchio's statements -- and his omissions of any "insider" information he might have had about trouble brewing at Qwest -- led people like Anderson to buy stock.

But under cross-examination, Anderson said she was among a group of people contacted about testifying and that the government had been looking for people who "lost a lot of money in Qwest stock" -- a comment that was clearly audible to jurors before defense attorney Marci Gilligan cut her off.

Later, outside the courthouse, Anderson would say only that she had lost "a lot" of money.

"Let's hope we get some kind of justice," she said.

Prosecutors have argued that the case against Nacchio, who faces 42 counts of insider trading, is an issue of fairness.  The CEO grossed nearly $101 million by selling stock between January and May 2001 -- when he knew the company would have trouble meeting targets, prosecutors allege -- while at the same time painting a rosy picture for investors like Anderson.

But defense attorneys argue that all investments come with risks and that the company warned investors the market was unpredictable and there were no guarantees.  They also say Nacchio believed what he said in that e-mail and in other statements just like it.

Also Thursday, former Qwest board member Craig Slater testified that the board of directors did not force Nacchio to sell shares in early 2001.

Defense attorney Herbert Stern said during opening statements this week that the board directed Nacchio, "Joe, go sell."  Nacchio had wanted an extension on stock options that were scheduled to expire in mid-2003, but the board refused.

Slater conceded the board would not extend the options.  But he said board members wanted Nacchio to enter into a sales plan that would have spread his sales in a regular and automatic pattern over the next approximately two years, rather than selling large chunks at his own discretion.

"We did not require," Slater said.  "We did not demand. . . . We did not force."

Thursday morning, Lee Wolfe, the former director of investor relations, testified that several people in addition to Nacchio -- including Qwest lawyers and its outside auditors -- were involved in deciding whether to disclose information to Wall Street.  Wolfe earlier in the week said he urged Nacchio to tell investors that a large part of anticipated revenues were coming from large, one-time sales of space on Qwest's network -- sales Wolfe considered unstable.

Asked by defense attorney John Richilano how the CEO responded, Wolfe said Nacchio asked why investors needed to know.  When Wolfe told him it was to make an informed decision on whether to buy stock, he said Nacchio replied:  "Screw 'em.  Go tell them to buy."


  Former Qwest/U S West employee Sally Anderson testified that she boosted her retirement savings allocation in Qwest stock from 50 percent to 100 percent based on a September 2000 e-mail to employees from Nacchio.

  Craig Slater testified the Qwest board never required or forced Nacchio to sell his stock.  He confirmed Nacchio asked the board if he could extend the June 2003 expiration date of his first batch of stock options but estimates the company would have had to take an accounting charge of several hundred millions of dollars against earnings.  Slater also confirms Nacchio considered quitting in early 2001 when one of his sons was going through emotional issues.

  Nacchio attorney John Richilano provides a tease of the possible "secret (government) contracts" defense as he finishes cross-examining former Qwest investor relations executive Lee Wolfe.


  Court will not be in session today.  The trial resumes Monday.


Basically his response was, 'Screw 'em. Go tell them to buy.' "

Lee Wolfe, former Qwest executive for investor relations, testifying that Joe Nacchio refused to release detailed financial data to shareholders and analysts


  Members of Boy Scout Troop 345 from Greenwood Village were among the spectators attending the trial Thursday.

About 10 Scouts sat in the overflow room to watch the trial on video monitors for about a half-hour.  Earlier, they had met with federal Judge Robert Blackburn in a separate courtroom and conducted a mock trial.

Scoutmaster Steve Leonhardt said the Scouts were earning their "Citizenship in the Nation" badge, which requires them to visit a federal facility.

"The case was really interesting," said Scout Adam Gardner, referring to the mock trial.  But he said watching the Nacchio trial was interesting as well. or 303-954-5314. Staff writer Jeff Smith contributed to this report.,2777,DRMN_23910_5436961,00.html