Conviction could cost Nacchio $71 million
By David Milstead
Rocky Mountain News
Friday, April 21, 2007
Joe Nacchio could be out $71 million as a result
of his conviction -- but that's just a slice of the $321 million
he made in his time as Qwest CEO.
The Rocky Mountain News estimates Nacchio made that money
from his start in 1997 through the end of his consulting
contract in 2004. The amount, prior to any income taxes Nacchio
paid, includes $24.4 million in "growth share" payments, nearly
$15 million in severance, and $248 million in stock-option
Nacchio's Thursday's conviction on 19 counts of insider trading
involved sales of 1.33 million shares of gross proceeds of just
over $52 million. Nacchio acquired the shares with stock
options that allowed him to buy at $5.50 apiece,
Each of the 19 counts of insider trading carries a maximum
possible fine of $1 million.
Also, the government is arguing that at sentencing, Nacchio
should be forced to turn over the $52 million gross amount, with
no consideration for the $7.3 million he paid for the shares, or
the taxes he paid on the $44.7 million in profits.
In doing so, they cite a court case that says criminal
forfeiture is based on gross proceeds, not profits, "in order to
alleviate the unreasonable burden on the government of proving
Nacchio's attorneys have said in a past court hearing they
believe he should only have to turn over net amounts.
Who will get that money? It's not yet set, but the government
will make a motion requesting how it wants the forfeited
proceeds to be distributed, and many expects expect it to
request that it be put into a restitution fund. Judge Edward
Nottingham will make the decision.
So far, Nacchio hasn't borne the financial burden of his
defense. Qwest is covering Nacchio's legal bills, as well as
those of many other former officers and directors, as part of
standard corporate practice.
Qwest can use proceeds from its insurance carrier to pay for it,
but now, with the conviction, it has an option to pursue Nacchio
for the legal costs.
"Qwest has certain obligations to advance legal fees to current
and former executives," spokesman Bob Toevs said. "We will
consider the impact of the jury's verdict on this obligation,
but in the meantime, we will continue to carefully review all
expenses submitted to us by the former CEO and his legal team."
What Nacchio made
A breakdown of Joe Nacchio's compensation at Qwest, which
includes salary, bonus, stock options and incentives.
1997 - $ 8,298,734
1998 - $ 19,569,048
1999 - $ 69,317,049
2000 - $ 103,949,221
2001 - $ 103,798,470
2002 - $ 13,972,288
2003 - $ 1,500,000
2004 - $ 750,000
Grand Total - $321,154,810
* Of note: Stock options netted Nacchio $248,046,630.
Source: Rocky Mountain News Research Of Qwest's Filings With The
Securities And Exchange Commission
Staff writer Jeff Smith contributed to this report.