The Association of U S West Retirees



Joe Nacchio's reversal of fortune
By Andy Vuong, Staff Writer
Denver Post
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 appeal.

"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 appeal."

Staff writer Andy Vuong can be reached at 303-954-1209 or