A saga not near its end
By Al Lewis, Dow Jones Newswires
Thursday, February 26, 2009
Drag former Qwest CEO Joe Nacchio to prison, but keep two
thoughts in mind.
Qwest investors will never get all of their money back.
And Nacchio will never admit he's guilty. No matter how
the story ends.
Nacchio was convicted in April 2007 on 19 counts of illegal
insider trading. Some transactions for which he was
brought to trial occurred as far back as 2001.
This legal drama has had more episodes than TV's "Law & Order."
In March, a three-judge panel of the 10th Circuit Court of
Appeals in Denver ordered a new trial
for Nacchio after finding that the trial judge improperly
excluded expert testimony.
In September, a broader panel of appellate judges reviewed that
decision in an "en banc" hearing, an event so rare that lawyers
packed the gallery just to see it. This panel decided
Wednesday to reinstate Nacchio's conviction.
It is now . . . um, 2009. Enron's Ken Lay is long dead.
And we are faced with a whole new era of Ponzi-scheming
hedge-fund managers and miscreant bankers -- perhaps way too
many to prosecute. And there hardly seems time to worry
about some questionable stock trades exposed when the Internet
bubble popped and the far-more-devastating mortgage bubble was
only getting started.
After Nacchio was fired from the phone company in June 2002,
Qwest restated its books, erasing $2.5 billion in improperly
booked revenue from 2000 to 2002.
Securities and Exchange Commission -- which can never seem to
uncover a multibillion-dollar Ponzi scheme -- is still pursing
Nacchio for accounting fraud.
Yet in all these years, Qwest hasn't really had a better CEO
since Nacchio, at least as measured by its stock price.
Qwest stock, which once reached more than $60 a share during
Nacchio's heyday, traded for $4.50 on the day after Nacchio was
ousted. It closed Wednesday at $3.53.
For now, it looks like Nacchio's six-year prison sentence is
back on. So are the $19 million in fines and the
forfeiture of $52 million he made in stock trades.
But his attorney, Maureen Mahoney, said she plans to push this
aging legal saga even further into the future by taking the case
to the U.S. Supreme Court.
Circuit Court of Appeals, after all, was narrowly divided, with
four of nine judges dissenting from the decision to reinstate
There is a litany of legal issues to get into, but Mahoney
pointed to a statement by the dissenting judges: "We have
nagging doubts about the district judge's sense of fairness
toward this defendant."
That district judge was former Chief U.S. District Judge Edward
W. Nottingham Jr., who is more renowned for his bizarre antics
than his sense of fairness.
Nottingham resigned in October amid an
investigation into alleged judicial misconduct, which included
allegations that he frequented prostitutes, surfed porno site at
his bench and menaced a woman in a wheelchair who complained
that he was illegally parked in a handicapped space.
All of this came out just after Nottingham
had handled -- or some say mishandled -- the highest-profile
case of his career.
Carl Tobias, a law professor at the
of Richmond's law
school in Virginia, says the rarity
of an en banc decision, combined with the judges' split
opinions, gives Nacchio's legal team a respectable shot at
getting the Supreme Court's attention.
"Mahoney might be able to pique their interest on this one," he
So for some time to come, Nacchio will still be in the news.
Qwest stock will still be in the tank. And nobody will be
moving on with their lives.
Al Lewis: 201-938-5266 or