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Nacchio's case to stand on own
Enron verdict not likely to sway trial of former Qwest CEO
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, observers say.

"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 seen."

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 scandal.

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 panels.

"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 Denver.

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 information."

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 stock
  Grossed more than $100 million from the trades
  Misled investors on Qwest's financial condition


  Forfeit $100 million of stock gains
  $1 million fine for each count
  10 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,2777,DRMN_23916_4727953,00.html