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Nacchio conviction reversed
By Andy Vuong
Denver Post
Monday, March 17, 2008

Article Last Updated: 03/17/2008 11:53:08 AM MDT

The 10th Circuit Court of Appeals has reversed the guilty verdict in the insider trading case of former Qwest CEO Joe Nacchio and ordered a new trial before a different judge.

The decision was 2-1 to overturn the verdict.

After a month-long trial in Denver federal court, Nacchio was convicted in April 2007 on 19 counts of insider trading connected to his sale of $52 million in Qwest stock.  He was acquitted on 23 other charges.

He was sentenced to six years in a prison and ordered to forfeit the $52 million in ill-gotten gains and pay $19 million in fines $1 million per count.

U.S. District Court Judge Edward Nottingham presided over the District Court trial.

Nacchio, 58, argued on appeal that he should be granted a new trial because of flawed jury instructions, the wrongful exclusion of a defense expert witness and rulings related to his classified information defense.  He also contended that the case should be thrown out because there was insufficient evidence for conviction.  During oral arguments in the appeal in December, the judges focused on the exclusion of expert testimony and whether the inside information Nacchio sold stock on the basis of was "material," or important enough that he was legally required to disclose it to the public.

Prosecutors showed during trial that Nacchio received repeated warnings from several of his top lieutenants about Qwest's deteriorating financial condition in 2000 and 2001.  Many of them, including former president Afshin Mohebbi and former CFO Robin Szeliga, testified that beginning late 2000 they told Nacchio that it would be a huge stretch for Qwest to hit 2001 financial projections.

Nacchio kept their concerns private while accelerating his sale of company stock in early 2001, the government charged.  At the same time, Nacchio kept reassuring investors that the company would hit its publicly stated financial targets.

The defense argued the warnings Nacchio received were related to Qwest's internal budgets and thus did not have to be disclosed to the markets.  His attorneys also contended that Nacchio was too consumed with the mental health of his oldest son to plot such a crime.  It was revealed during trial that David Nacchio attempted suicide in early 2001, nearly pushing his father to resign from Qwest.

Qwest founder Philip Anschutz, who handpicked Nacchio to lead the fast-growing startup in 1997, testified that he talked Nacchio out of resigning.

The aggressive Nacchio had spearheaded a spectacular takeover of US West in 2000, which transformed Qwest from startup into one of the country's largest telecommunications companies.

Qwest, however, nearly collapsed into bankruptcy in the summer of 2002 amid an accounting scandal and the tech downturn.  Nacchio was ousted in June 2002. Qwest later restated more than $2 billion in revenue booked under his watch.

Nacchio didn't take the stand in his defense.  He maintained an upbeat presence publicly throughout much of the trial and sometimes took notes during testimony.  He welled with emotion whenever his son's mental illness was discussed.

Nacchio was given the opportunity to address the court before his sentence was handed down in July, but declined.  At the end of that hearing, Nacchio made a bizarre attempt to speak, only to be rebuffed by the judge.

Andy Vuong: 303-954-1209 or