Nacchio trial evidence made public
By Greg Griffin, Staff Writer
Friday, May 11, 2007
Prosecutors released 500 exhibits Thursday used to convict
former Qwest chief executive Joe Nacchio of illegal insider
trading, including warnings he received in April 2001 that
recurring sales were down and the company was relying too
heavily on one-time deals.
The evidence includes 488 documents comprising thousands of
pages, 10 video clips of Nacchio speeches and two audio
recordings of Nacchio presentations to analysts. The documents
and recordings span a time frame of 1998 to 2001.
The Denver Post has placed selected pieces of the evidence on
its website at nacchiotrial.com.
Nacchio was convicted April 19 on 19 of 42 insider-trading
charges. He was accused of selling $100.8 million shares of
Qwest stock from January to May 2001, when he knew the company
was in financial trouble. Sentencing is set for July 27. The
evidence released Thursday included:
- Notes Nacchio received from former Qwest president Afshin
Calling Qwest's publicly stated 2001 earnings targets a "huge
stretch," Mohebbi warned that Qwest needed strong growth in
recurring revenue early in the year. He said one-time sales of
Qwest's network capacity could not be relied upon to make the
- Warnings Nacchio received throughout early 2001 informing him
that recurring sales were down and the company was relying too
heavily on one-timers.
Those warnings culminated in early April, when executives told
Nacchio that shortfalls in recurring revenues were $329
million. The company was filling the gap with one-time sales of
network capacity at a rate 30 percent higher than planned.
- Nacchio's public pronouncements to Qwest employees, analysts
and investors affirming the company's earnings targets.
- The government used video and audio clips to show that
Nacchio was touting Qwest's performance even as he was receiving
dire warnings internally. On April 25, Nacchio assured analysts
Qwest would make its 2001 numbers. Over the next few days, he
dumped hundreds of thousands of Qwest shares.
- Qwest's publicly released documents setting, raising,
affirming and, finally, in September 2001, lowering its 2001
- Documents from analysts questioning Qwest's accounting
starting in June 2001.
- In a July 2001 e-mail to Nacchio, Goldman Sachs analyst
Prashant Khemka said, "The lack of transparency is going to hurt
you because investors don't know how many cockroaches you still
have in your bag."
Other documents that were important at trial but may not have
played as large a role in the conviction include:
- Documentation supporting the government's contention that
Nacchio backdated a stock-sales document. The government
released a sales instruction dated Nov. 3, 2000, that it said
Nacchio actually executed more than a month later. It also
released key communications with Nacchio's financial planner.
- Nacchio's financial records from December 2000 putting his
net worth at $547 million.
Staff writer Greg Griffin can be reached at 303-954-1241 or