Nacchio's case to stand on own
Enron verdict not likely to sway trial of former Qwest
By David Milstead
Rocky Mountain News
Friday, May 26, 2006
Don't assume that the
Enron convictions mean that Qwest's Joe Nacchio is the
next executive to be fitted for stripes. While there
are obvious parallels -- CEOs who denied any fraud
occurred after their companies collapsed -- every case
is unique, and every jury has a mind of its own,
"These corporate cases are very different company to
company, as well as executive to executive," said Lynn
Turner, the former chief accountant to the Securities
and Exchange Commission who is now part of the research
firm Glass Lewis. "While this verdict will no doubt be
seen by millions on television and no doubt influence
their thoughts, when you get into a courtroom, it's very
much dependent on that case and what the jurors have
A federal grand jury indicted Nacchio in December on 42
counts of insider trading involving $100 million of
stock sales in 2001. The charges capped a four-year
federal investigation into Qwest's $3 billion financial
Nacchio's early defense strategy seems to not only deny
that fraud occurred but to argue that he possessed
national security secrets that made him optimistic about
Qwest's future prospects for government business.
Nacchio was cleared to see classified information while
serving on presidential telecommunications advisory
"That's going on the offensive, rather than going on the
defensive," said former federal prosecutor Chris Bebel,
now an attorney in private practice in Houston.
Thursday's Enron convictions "show you can get
convictions on insider trading, but it depends on the
facts," said Tony Leffert, a former federal prosecutor
and now partner at Robinson Waters & O'Dorisio in
Insider trading, Bebel said, "is an extra layer of
proof. After the government proves knowledge of the
fraud, they must then prove the defendants effected the
(stock) sales in order to capitalize on that
Former Enron CEO Jeffrey Skilling was acquitted on most
of the insider-trading charges he faced, but many of
those sales occurred after he left Enron, so the jury
was not convinced the standard was met, Bebel believes.
All of Nacchio's sales covered in the indictment, by
contrast, occurred while he was CEO.
The Nacchio case, Turner said, "is much more narrowly
focused" than Enron's, which portends well for the
prosecutors. Yet, "Is the U.S. attorney here, Bill
Leone, up to the task? I don't know. His track record
to date raises serious question about that."
A 2004 trial of four midlevel executives on multiple
counts of conspiracy and fraud was a failure for
prosecutors, with no convictions, only acquittals on
most charges and a hung jury on the rest. Two of the
men ultimately pleaded guilty to a single count apiece.
Herbert Stern, Nacchio's attorney, did not return a call
for comment Thursday.
He told the Rocky
Mountain News last week, at a hearing in
Denver, that he prefers to make his public statements
"inside a courtroom" rather than to the press.
Jeff Dorschner, spokesman for the U.S. attorney's
office, declined to comment.
Case against Nacchio
• 42 counts of insider trading of Qwest
more than $100 million from the trades
investors on Qwest's financial condition
$100 million of stock gains
million fine for each count
years in prison for each count
David Milstead is
finance editor of the Rocky Mountain News. He can be
reached at 303-892-2648 or