The Association of U S West Retirees



"Anxious" Nacchio should be resting easy 
By Al Lewis, Staff Columnist 
Denver Post 
Thursday, April 5, 2007

Good thing I'm not on the jury in the trial of former Qwest chief executive Joe Nacchio, because right now I'd be thinking about letting him go.

I say this as the columnist Nacchio's defense team has called "a major architect of ... very hostile stories" -- a guy cited in court documents as a solid reason to move this trial to another city.

After the prosecution rested its case Wednesday, I even said as much to Nacchio, but my words provided no relief.  "I'm anxious," Nacchio said.  "I wouldn't be human if I said that I wasn't anxious."

I could see anxiety in his deep-set eyes.  During court proceedings, I watched him shake both legs beneath the table.  He is not resting easy, but I think he should be.

I'm no mind reader, but to me some of the jurors looked surprised when the prosecution said it rested its case.  One even shrugged his shoulders, like "What?"

Now, I don't mean to slight the prosecutors.  Cliff Stricklin and his deft colleagues did a remarkable job marshaling all the circumstantial evidence they could use, while keeping the case simple.

These prosecutors clearly illustrated how Nacchio may have misled his investors, bullied his underlings, inflated Qwest's financial results with one-time sales of telecommunications lines and dumped more than $100 million worth of stock.  They also exposed irregularities in Nacchio's trading patterns and produced documents that were allegedly backdated to cover some of Nacchio's questionable trades.

They gave the jury some memorable testimony.  On Wednesday, for instance, Goldman Sachs analyst Prashant Khemka recalled a conversation he had with Nacchio in January 2002.  This is what Prashant testified that Nacchio told him about the 2000 Qwest-US West merger:

"Never believe a word 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."

No criminal intent shown

Prosecutors may have shown the jury that Nacchio was a hype artist, a stock dumper and an arrogant CEO.  But they have not shown whether Nacchio had criminal intent when he sold his shares.

It would be nice if someone went to prison for the Qwest mess.  But did Nacchio intend to trade illegally?  What was going on in his mind when he sold his stock?  Didn't anyone hear him brag about his alleged pump-and-dump scheme?

The prosecution fell short of answering these very crucial but very difficult questions.  Now, they can only hope the jury will look at the piles of money Nacchio made and conclude that building this fortune was his motive.

The jury, however, might not take this leap.  Jurors do not know from the court record that Qwest restated its earnings after firing Nacchio.  That Qwest stock once fell to 99 cents.  Or that many of the one-time deals used to prop up Qwest's books are alleged to be fraudulent exchanges.  There was hardly even a victim presented in this case.  The only woman called to testify about her damaged nest egg could not say how much she lost.

No victim, no crime, I always say.

Case hamstrung

Judge Edward Nottingham wouldn't allow these facts into evidence, calling them irrelevant or prejudicial.  By not charging Nacchio with accounting fraud -- as the Securities and Exchange Commission has alleged -- prosecutors have kept their arguments simple, but they have also hamstrung their case.

They have left a wide screen for the defense to cast shadows of reasonable doubt.  Nacchio was just a victim of the telecom bust, defense lawyers will argue.  He sold stock because his options were expiring and because he needed to diversify.  He couldn't help it if stock analysts didn't pick up on warnings about forward-looking statements.  He couldn't help it if his bold predictions about the future did not prove true.  He meant well.

Nacchio's lead attorney, Herbert Stern, is a magician when it comes to this sort of trick.  But one thing Stern has to do now is keep his client off the witness stand.  Too many corporate executives have convicted themselves on the stand.

Nacchio told me Wednesday it hasn't yet been decided whether he'll testify.

"That's up to my attorneys," he said.

"Don't do it," I told him.  "You don't need to.  Your case is going well."

Al Lewis' column regularly appears Sundays, Tuesdays and Fridays. Respond to him at, 303-954-1967 or