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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 revenues.

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," Traskos stated.

Prosecutors also want Nacchio to itemize his assets, including those held by his wife, Anne Esker, and any family trusts and foundations.

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.

Nacchio's assets


  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 or 303-954-5343,2777,DRMN_23910_5547341,00.html