Nacchio claims acts in good faith
By Jeff Smith
Rocky Mountain News
Thursday, June 7, 2007
Former Qwest CEO Joe Nacchio denied allegations he orchestrated
a $3 billion massive financial fraud at the Denver telco between
1999 and 2002, saying he acted in good faith "at all times" and
relied on accounting and legal experts. Nacchio's denials came
in a 36-page response filed by his attorneys late Tuesday to an
amended civil-fraud lawsuit by the Securities and Exchange
The filing reiterated claims that Nacchio was privy to "top
secret information" regarding classified government contracts
that led him to reasonably believe in Qwest's ability to meet
its financial targets.
The SEC is seeking potentially hundreds of millions of dollars
in alleged "ill-gotten" gains and civil penalties.
Some discovery, or evidence exchange, against Nacchio is on hold
while he challenges his recent conviction on 19 criminal counts
of insider trading. Experts say the SEC suit has a greater
chance of success now that he has been found guilty of criminal
activity in connection with selling $52 million of stock in
Nacchio said he relied on the advice of internal and outside
lawyers and auditors, and the audit committee of the board of
Nacchio said a reasonable accountant could conclude the swaps
could be treated as "sales-type leases" and revenue therefore
could be booked upfront. Nacchio said he wasn't informed that
alleged secret side deals were made that invalidated the
accounting of some deals.
Qwest has since erased more than $2.5 billion of revenue from
its 2000 and 2001 books, including nearly $1 billion in revenue
from swaps of network capacity with other carriers.
Separately in the criminal case, Nacchio's attorneys this week
filed a new round of motions for acquittal, a new trial and a
change of venue. The filings included hundreds of pages of
exhibits in support of their contention that massive,
"prejudicial" media coverage before and during the trial
prevented Nacchio from receiving a fair trial.
Nacchio's attorneys said in the filings that 14 of 18 jurors and
alternates had knowledge of the case beforehand, and that the
publicity didn't die down during the trial as predicted by U.S.
District Judge Edward Nottingham. Reflecting the public
hostility toward Nacchio, the filings cited two incidents in
which motorists shouted obscenities and hostile remarks,
including "Hey Nacchio, I hope you get cancer and die."
smithje@RockyMountainNews.com or 303-954-5155