Colombo-like defense drops ticking time bomb
By Anthony Accetta
Monday, March 26, 2007
Now the promises of lawyers move from talk to
action. The real case has begun. No opinion. Not
speculation. Just evidence. What did Joseph Nacchio say? What
did Joseph Nacchio do? What did Joseph Nacchio know when he
With one huge exception, the defense so far seems to rely on
style points, while the prosecution is building its case bit by
bit in a workmanlike manner. Defense attorney Herbert Stern
came under fire from Judge Edward Nottingham on Thursday for
being unprepared, for being slow, and for making mini summations
before many questions. That is a tactic many trial lawyers
use. Repeat something favorable as part of a question, and then
do it again and again, until the jury hears the question as a
recitation of facts favorable to the defense rather than as a
Stern pushed that one until a red-faced judge fairly blew up.
But there was method in Stern's madness. It is early in the
trail and he needs to know how far he can go with this judge.
Stern plays Colombo, scratching his head and bumbling through
papers. He strains to ingratiate himself as just a regular
guy. The judge is having non of it. Who know if the jury is
Make no mistake, Herbert Stern is not unprepared. Herbert Stern
is not disorganized. Herbert Stern is executing the script he
laid out in his opening statement and doing his calculating best
to make things so because he says they are so.
So far the government has presented all the right preliminary
evidence that Joseph Nacchio had the benefit of negative inside
information when he sold stock in Qwest for millions and
millions of dollars.
That is not where the drama in this case has come from. The
drama so far has come from the emerging defense that nothing is
Joe Nacchio's fault. It was Phil Anschutz who kept throwing
dollars and stock options at him. It was the company that
caused him to extend his contract, when all he rally wanted to
do was stay home and take care of family problems. It was the
compensation committee that kept giving him option after option
worth millions. It was the board who forced him to not only
exercise those options but also to sell the underlying stock
rather than hold onto it. It wasn't Joe's fault that the
"value" shares he sold in the open market were doomed to plunge
when the truth about the company came out. Or is it that Joe
was a victim of a general decline in the market?
Maybe this tactic will work, maybe not. But the defense has
placed a silent ticking time bomb into this case that could be
devastating. The government's case depends on proving that
Qwest was meeting Wall Street expectations of revenue through
the use of "nonrecurring" sales. These were sales of
fiber-optic capacity which are portrayed by the government as
"one-time deals." When the one-time deals stopped, the theory
is, Qwest's revenues would plummet and so would its stock
price. Maybe Nacchio honestly believed otherwise.
On cross-examination of the government's first witness, Lee
Wolfe, Qwest's chief investor-relations executive, the defense
obtained evidence that could shatter the government's theory,
unless it is rebutted. Wolfe's so far uncontradicted testimony
was that Qwest possessed "virtually unlimited" fiber-optic
capacity for sale in a market that had ample demand for that
capacity. The record, as it stands, will allow the defense to
argue that the so-called "one-shot deals" were in fact not
one-shot at all, but the first in a predictable series of
capacity sales that would constitute recurring income for a
substantial period of time, not nonrecurring income.
As good lawyers will do, Stern obtained that little piece of
testimony very quietly, and it was not highlighted in any way.
It won't be highlighted again until summation. If it is not
discredited before then, the government's case will suffer a
possibly fatal blow. The stock drop could have come from market
conditions, not from undue reliance on one-time sales, it will
be argued. Therein lies reasonable doubt.
Anthony Accetta is a former assistant U.S. attorney in New
York and former first assistant attorney general and special
prosecutor in Colorado. He has prosecuted many
white-collar-crime cases and heads the Denver-based Accetta