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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 profits.

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 net profits."

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.,2777,DRMN_23910_5497045,00.html