The Association of U S West Retirees



Nacchio's not likely to cave in court
By Al Lewis, Staff Columnist
Denver Post
Tuesday, December 6, 2005

If the government brings a criminal indictment against former Qwest CEO Joe Nacchio, he's not going to fall apart like other indicted executives.

He won't boldly proclaim ignorance and cry when nobody believes him, like former WorldCom CEO Bernie Ebbers.

He won't freak out like former Enron CEO Jeffrey Skilling, who reportedly had too many drinks in a Manhattan bar in April 2004 and started accusing other patrons of being federal agents.

Nor will Nacchio suddenly get religion and start preaching on the church circuit, like HealthSouth's Richard Scrushy.

If indicted, it's a safe bet Nacchio will keep on being his overconfident self -- countering every allegation with an explanation, apologizing without really apologizing, and fighting like a guy from New Jersey.  In this sense, he would be more like Martha Stewart than any other recent well-known white-collar defendant -- only without the fan club.

Nacchio recently hired former federal prosecutor and judge Herbert Stern for his defense.  Stern was lauded in a 1973 book, "Tiger in the Court," for his campaign against political corruption in New Jersey.  Stern is also the author of a set of books called "Trying Cases to Win."

Hiring Stern may indicate that Nacchio is preparing for an insider-trading indictment.  But it's not a foregone conclusion that Nacchio would be convicted.  Insider-trading cases are difficult to prove -- and this case already has prosecutors facing a tough challenge.

Nacchio made $176.5 million selling Qwest stock between 1999 and 2001 as he and others fraudulently reported billions in revenues at Qwest, according to civil charges in March by the Securities and Exchange Commission.

To make insider trading charges stick, the U.S. Attorney's office will have two easy parts and one hard one.  The easy parts are to show when Nacchio sold his stock and what he told the public as he sold his stock (both a matter of record).  The hard part is to prove what he actually knew about Qwest's financial condition as he sold stock and made public statements (a matter of conjecture).

For this third prong of the case, prosecutors have put the squeeze on potential witnesses.  They've reportedly lined up Qwest's former chief operating officer, Afshin Mohebbi, who may have been granted immunity in exchange for testimony.  And they've got former chief financial officer Robin Szeliga, who awaits sentencing after pleading guilty to insider trading charges.

For Legal Team Nacchio, casting doubts on these witnesses' testimony will be key, and it won't be impossible because both Mohebbi and Szeliga have a lot to gain by turning on their former boss.

Nacchio's lawyers may argue that Nacchio sold his stock on a prearranged schedule.  They may point to financial advisers who told Nacchio to divest because he had too much wealth in Qwest stock.  They'll say he cashed stock options because they were expiring.

Nacchio's defense also will argue that he believed Qwest's future was bright when he sold his stock.  According to The Wall Street Journal, Nacchio's lawyers may argue that Nacchio believed Qwest was in line to receive lucrative contracts from the federal government -- secret, national security contracts that only people near his level would know about.

"It's the Alice in Wonderland defense," said Anthony Accetta, a Denver fraud investigator who served as Colorado's first assistant attorney general in Colorado in the '70s.  "He's using inside information to justify using inside information?"

It does smack of a certain bravado -- the kind for which Nacchio is renowned.  Count on Nacchio to stick to the same story he's been telling for years.

"At any time I sold Qwest stock, I believed that the company's financial statements represented a full and accurate picture of its financial condition," Nacchio told a congressional panel in 2002.  "I regret that I was unable to complete the job of building Qwest into the global telecommunications leader we had envisioned, and I am truly sorry for any losses suffered by Qwest shareholders and for the thousands of Qwest employees who lost their jobs."

Sorry, yes.  But unless prosecutors, regulators and lawyers for aggrieved shareholders succeed, he's keeping the money.

Al Lewis' column appears Sundays, Tuesdays and Fridays. Respond to Al at, 303-820-1967, or