Nacchio fund freeze sought
Prosecutors: Former Qwest boss put huge assets in wife's name
By Sara Burnett
Rocky Mountain News
Monday, May 21, 2007
Former Qwest CEO Joe Nacchio transferred at least $133 million
and one of his New Jersey homes into his wife's name and even
considered a divorce in early 2002 so no one could get their
hands on his money, prosecutors allege in newly filed court
documents. According to a motion filed late Friday in federal
court, Nacchio became "very paranoid" after investors started
filing civil lawsuits against him and after the Securities and
Exchange Commission subpoenaed information about Qwest's
The motion seeks to freeze the $52 million Nacchio grossed from
illegal stock sales and reveals details of financial
transactions not presented during his five-week trial that ended
in his conviction for insider trading.
Prosecutors argue in the motion that the $52 million Nacchio
grossed from the illegal stock sales belongs to the government,
even if the CEO moved the money into accounts in only his wife's
name. The transfers were void under New Jersey law because,
among other reasons, he retained control of the assets after the
transfer, and he moved the assets after being sued, they said.
The motion quotes notes that Nacchio's former financial adviser,
David Weinstein, wrote to himself after discussions with the
CEO. In one, Weinstein wrote that there seemed to be "a certain
element of fraud" involved in getting divorced for strictly
financial reasons. He also said Nacchio was considering cashing
out his 401(k) and an IRA -- paying taxes and penalties -- so he
could put that money in his wife's name as well.
"Joe basically wants to have no assets in his name, and he can
then claim he is bankrupt," Weinstein wrote after an "emergency
meeting" with Nacchio in October 2002.
Nacchio was charged in late 2005 with 42 counts of insider
trading, one count for each time he sold stock between January
and May in 2001. He grossed nearly $101 million from the sales.
In April, a jury convicted him on 19 counts, for the sales in
April and May 2001. Jurors said it was obvious by that time
that Qwest was heading for financial trouble and that Nacchio
should have shared that information with investors. He is
scheduled to be sentenced July 27 and still faces an SEC
lawsuit. His attorneys have said they will appeal.
Nacchio faces up to 10 years or more in prison and a fine of up
to $19 million. He also could be ordered to forfeit the $52
million. Prosecutors said the purpose of freezing the assets is
"to preserve the status quo" until sentencing and to make sure
the government can find and access the money, Assistant U.S.
Attorney Kevin Traskos wrote.
"This concern is warranted by Mr. Nacchio's past actions --
abruptly transferring $130 million in assets out of his name in
2002, with the clear intention of avoiding any claims of
potential creditors and to make himself appear bankrupt,"
Prosecutors also want Nacchio to itemize his assets, including
those held by his wife, Anne Esker, and any family trusts and
Defense attorney John Richilano argued at trial that jurors
should not hear testimony about Nacchio transferring assets to
his wife because prosecutors had no proof that the CEO was
trying to hide the money.
• Mendham, N.J.: Valued at about $3 million,
with no mortgage; 50 percent in Nacchio's name, 50 percent in a
trust controlled by his wife, Anne Esker
• Beach Haven, N.J.: Valued at more than $2
million, no mortgage; 50 percent Anne Esker, 50 percent in a
trust controlled by Nacchio
• Chester, N.J.: Value is unknown; Nacchio
conveyed his interest to his wife in March 2002
• Jupiter, Fla.: Valued at about $9.5 million;
owned by Anne Esker
Source: Court Documents
burnetts@RockyMountainNews.com or 303-954-5343