The Association of U S West Retirees



Anschutz to testify Thursday
By Tom McGhee, Staff Writer 
Denver Post 
Thursday, April 5, 2007

Qwest founder Philip Anschutz will be the first witness Thursday morning as the defense begins presenting its case in the insider trading trial of former Qwest CEO Joe Nacchio.

Anschutz will be followed by Giles Hays, a Catholic abbot.  A law professor named Daniel Fischel is scheduled to be the third witness.  Defense attorney Jeffrey Speiser named the upcoming witnesses in open court today.

The prosecution rested its case earlier in the day after calling 20 witnesses in 10 days.

"The United States rests its case," announced assistant U.S. attorney James Hearty just before 3 p.m.

U.S. District Judge Edward Nottingham recessed the trial for the day, telling Nacchio's lawyers they should be ready to go with their defense first thing Thursday morning.  The government's last witness showed jurors that Nacchio accelerated his stock sales during the first five months of 2001 when compared with his sales from January 1998 to December 2000.

Prashant Khemka, a Goldman Sachs analyst, testified for the prosecution today that he had recommended that his company buy Qwest stock in 2000.  But a year later, he became so concerned about Qwest's financial condition that he wrote a letter to Qwest executives questioning the credibility of its financial reporting.

"There is a big credibility issue now surrounding Qwest," Khemka wrote in the July, 2001, letter.  "Why should we feel comfortable with your projections and accounting practices when the year 2001, so far, has been a year of failed promise and unpleasant shocks."

The letter went on to question Qwest's projection of a 100 percent increase in revenue and subscriber base.  Qwest later said it projected a 60 percent increase.

"What changed so dramatically?," Khemka asked.  "The wireless industry has been fine all along.  So it was a poor estimation on your part or was it something else?"

Investors, Khemka said, gave the company's revenue targets the benefit of the doubt during 2000 when it was pulling two companies together in its merger with US West.

Former Qwest investor relations head Lee Wolfe had earlier testified that he passed that letter to Nacchio.

Khemka also recalled a conversation he had with Nacchio in January 2002.

Nacchio said:  "Never believe a word of what management says at the time of a merger.  Do you think AOL Time Warner management believed what they said at the time of their merger?  Management has to say things to get the merger done."

On cross-examination, Nacchio attorney Jeffrey Speiser got Khemka to reiterate that Nacchio had a smile on his face when he said it.

Khemka, who travelled from India to be a prosecution witness in Nacchio's trial, said that during a conference call Nacchio dropped a target for earnings growth from 20 percent to 17 percent, and then insisted that the 17 percent was the number all along.  In his letter Khemka complained that investors would have to be fools to accept that.

Nacchio said the number had always been 17 percent or more and investors had assumed it would be 20 percent, he added.

Khemka also said that he and others representing big investors like Goldman attended a meeting with Qwest executives, including Nacchio, at Qwest's headquarters in March 2001.  After someone from the company's wireless unit told the group it would be difficult to make the targets set for the unit, Nacchio came back into the room.  Someone must have told Nacchio what the wireless representative had said, Khemka said, before a defense lawyer cut him off with an objection that Nottingham sustained.

Nacchio pounded the table and insisted the company would meet its targets, Khemka said.