The Association of U S West Retirees



What the jury heard and saw
By Rocky Mountain News
Friday, May 11, 2007

Prosecutors on Thursday released hundreds of documents, as well as video and audio clips, from the trial of former Qwest CEO Joe Nacchio, who was convicted last month of 19 counts of insider trading.  The evidence -- some key pieces of which are included here -- provides a glimpse of what jurors heard and saw during the weeks-long trial at the federal courthouse in Denver.

Prosecutors accused Nacchio of selling $100.8 million in Qwest stock between January and May 2001 while he had "insider" information that the company was headed for trouble.  The CEO should have shared that information with investors before he sold, the government said.

Jurors agreed, at least in regard to the shares Nacchio sold in April and May.  By that time, it should have been clear to the experienced CEO that the company couldn't meet its aggressive goals, jurors said after reaching their verdict.

Nacchio is scheduled to be sentenced in federal court on July 27.  He faces up to 10 years or more in prison, as well as fines of $1 million per count and forfeiture of $52 million.

Here is a look at some of the information jurors took with them to the jury room:

•  July 1999:  Nacchio, who joined Qwest from AT&T, and the CEO of U S West announce the two companies will merge.  The investor script is titled "Project America."  

•  July 10, 2000:  Days after the merger is complete, Nacchio speaks to Qwest employees at a leadership conference, telling them the company must "grow or die."

•  Sept. 2000:  An optimistic Joe Nacchio announces Qwest is raising its revenue targets for 2000 and 2001.

•  November and December 2000:  Chief Operating Officer Afshin Mohebbi, concerned the targets are two high, writes two memos to Nacchio.  He calls the goals a "huge stretch."  He and other witnesses told jurors the company was relying too much on onetime sales of space on its fiberoptic network to make their numbers, and that the sales were not sustainable.

•  Dec. 2000:  Nacchios show assets of $547 million.

•  Dec. 13, 2000:  Greg Casey, then the head of Qwest’s wholesale division, is outraged after receiving new revenue goals he thought were impossible to achieve.  So he fires off this succinct e-mail to top managers.

•  Dec. 21, 2000:  Qwest issues a press release reconfirming its targets.  Nacchio explains that the company isn’t experiencing the same troubles as other telcos.

•  Jan. 5, 2001:  At an "All Hands Employee Meeting," Nacchio tells staff that the first and second quarters of 2001 are "absolutely critical."

•  Jan. 10, 2001:  Nacchio tells staff during a sales meeting in Las Vegas that investors are skittish, and predicts "something big" — good or bad — will happen by April 2001.

•  Jan. 18, 2001:  Lee Wolfe, head of investor relations, tells Nacchio in a memo that the investment community is demanding answers on how Qwest is meeting its numbers while other telcos are struggling.

•  Jan. 24, 2001:  Qwest issues a press release saying it had a record fourth quarter 2000.

•  January to May, 2001:  Nacchio sells stock at a pace faster than ever before.  The government's indictment, returned in 2005, lists the stock sales on pages four and five (document from the Nacchio court file, not presented at trial).

•  April 24, 2001:  Qwest announces its first quarter results and reaffirms targets for 2001.  Though witnesses testified at trial that they repeatedly warned Nacchio the numbers weren't sustainable, the CEO tells investors there was nothing to sway the company from its goals.

•  July 2001:  Analyst Prashant Khemka sends a memo to Nacchio, demanding details on how the company is making its numbers and questioning how many "cockroaches" Qwest has in its bag.

•  Sept. 10, 2001:  Qwest issues a press release announcing it is lowering guidance for 2001.,2777,DRMN_23910_5531575,00.html