Ex-Qwest CEO convicted on 19 counts of insider trading
By Sandy Shore, AP
Friday, April 20, 2007
DENVER - Joe Nacchio, a former AT&T executive
tapped to transform Qwest Communications into a major
telecommunications competitor, was convicted Thursday of 19 of
42 insider trading charges after one-time top executives
described his relentless drive to meet revenue projections
without revealing financial risks.
A U.S. District Court jury deliberated six days before
concluding on 19 counts that the former Qwest chief executive
illegally sold stock in April and May of 2001, when he knew the
company faced financial challenges and relied heavily on
one-time sales to meet revenue targets. The jury acquitted him
on the other 23 counts stemming from sales in January and
Judge Edward Nottingham set a July 27 sentencing date for
Nacchio, who is free on $2 million bail. Each count carries a
potential penalty of 10 years in prison and a $1 million fine.
" 'Convicted felon Joe Nacchio' has a very nice ring to it,"
boasted Troy Eid, the U.S. attorney for Colorado.
Nacchio, who still faces a civil fraud lawsuit, declined to
comment. A smile sometimes crossed his face as he left the
federal courthouse arm-in-arm with his wife. They walked away
together on a busy downtown street.
Jurors convicted Nacchio on counts involving trades he made
after April 24, 2001 -- representing sales of 1.33 million
shares for $52 million in gross proceeds. Those were the first
trades that occurred after Qwest released its financial results
for the first quarter but didn't reveal how much of the revenue
came from one-time sales.
Prosecutor Cliff Stricklin said the jury "saw at some point that
Joe Nacchio knew what investors didn't and chose to profit from
"Insider trading is not a victimless crime. It's a crime about
fairness," Stricklin said. "Many lost their hopes and dreams
while others at Qwest took the easy way out."
Many former US West and Qwest employees and retirees lost
savings as Qwest's share price fell precipitously starting in
2001. Some of them applauded the verdict.
"This was our one shot at getting some sort of justice, and the
retirees I know are all very gratified that this verdict has
come through," said Mimi Hull, president of the Association of
US West Retirees.
A civil fraud lawsuit is still pending against Nacchio, former
President Afshin Mohbebbi and other one-time executives,
alleging they orchestrated a financial fraud that led to the
scandal. The Securities and Exchange Commission is seeking
repayment and civil penalties, with the amounts to be determined
Prosecutors wove a circumstantial case against Nacchio based on
the testimony of those who worked closely with him. Most
testified either under grants of immunity in exchange for
cooperation or after pleading guilty to a crime, saying they
repeatedly warned Nacchio that Qwest would not meet aggressive
financial targets for 2001 without relying heavily on revenue
from one-time sales that came from a waning market.
Despite their warnings, Nacchio refused to lower forecasts and
did not tell the public how much one-time revenue was included
in earnings, the witnesses said.