Nacchio's reversal of fortune
By Andy Vuong, Staff Writer
Sunday, April 22, 2007
The insider-trading conviction of Joe Nacchio will probably put
the former Qwest chief executive behind bars and lead to the
depletion of a personal fortune once pegged at more than $500
million, experts say.
It is a fate other former high-level executives, such as Enron's
Jeffrey Skilling and WorldCom's Bernie Ebbers, faced after
conviction on securities fraud and other charges.
"Once you're convicted, the drain on your assets is very
substantial," said white-collar-crime expert Peter Henning.
Nacchio's homes in New Jersey, his wife's $9.5 million mansion
in Florida and the $90 million he allegedly transferred to her
in 2002 could all be fair game for the government as it tries to
recover at least $52
million in ill-gotten gains and possibly millions more in
interest. "If you can't find the fruits of the crime, they can
go after any other assets of his to satisfy that $52 million
forfeiture order," said Henning, a professor at Wayne State
University Law School in Detroit.
Nacchio could also be hit with up to $19 million in fines,
though Henning said the fine will probably be $1 million or less
if the judge orders Nacchio to forfeit the entire $52 million.
U.S. District Judge Edward Nottingham will sentence Nacchio on
July 27 in Denver federal court. A day-long hearing is
scheduled so Nacchio, his family and others can speak to
Nottingham before Nacchio is sentenced.
Nacchio still faces civil lawsuits from shareholders and the
Securities and Exchange Commission, which is seeking the $216
million in salary, stock-sale proceeds, bonuses and other
compensation Nacchio received from 1999 to 2002.
The SEC could theoretically seek triple that amount in damages,
though the majority of its cases settle for less than the
initial lawsuit amount, Henning said.
"When you throw in the shareholder lawsuits and the SEC cases,
most of these defendants lose their wealth," Henning said.
Ebbers, convicted of fraud, conspiracy and other charges in
2005, forfeited nearly all of his assets to settle a civil
suit. He surrendered his home in Mississippi and stakes in a
lumber company, a marina, a golf course, a rice farm, a hotel
and other real estate. Skilling parted with his home in Texas
as part of $45 million forfeiture plan after he was convicted of
conspiracy, insider trading and other charges.
According to testimony from his former financial adviser,
Nacchio had a net worth of $547 million in December 2000 --
though roughly half of that was based on unvested options, many
of which went unexercised.
Prosecutors say he transferred $90 million to his wife, Anne
Esker, in February 2002. She purchased a $9.5 million mansion
in Jupiter, Fla., in 2005, according to property records.
Experts say if prosecutors can prove she used the money Nacchio
allegedly transferred to her to purchase the mansion, they could
seize it despite Florida's homestead exemption.
"If they can track the fraudulently obtained residence, then
it's subject to forfeiture," said William Michaelson, a
certified fraud examiner in West Palm Beach, Fla.
It's likely the government will work out some sort of payment
arrangement with Nacchio, Henning said.
The forfeited money would probably go to a fund to repay
shareholders who bought Qwest stock during the timeframe of the
illegal trades -- between April 26, 2001, and May 29, 2001.
Fines would either go to the fund or the U.S. Treasury.
Nottingham could technically sentence Nacchio to 190 years in
prison based on the maximum penalty of 10 years for each of the
19 guilty counts.
However, a prison term of eight to 10 years for all 19 counts is
more likely, based on federal sentencing guidelines, which
consider the type of crime, the money involved and other
factors, Henning said. Others say the prison sentence could
reach 15 years.
Federal statutes allow prisoners to be released after serving 85
percent of their term for good behavior.
Nottingham will decide at sentencing whether Nacchio will begin
serving his sentence while his appeal is in the works.
In 2005, Adelphia Communications founder John Rigas was released
on bail pending appeal of conspiracy, bank fraud and securities
fraud convictions. Skilling, however, is in prison during his
"Traditionally, released pending appeal has been granted very,
very rarely," said former federal prosecutor Kirby Behre. "It's
only (granted) if there's a significant issue to be raised on
Staff writer Andy Vuong can be reached at 303-954-1209 or