Another chapter in a book that never ends
By Al Lewis
Dow Jones Newswires
Wednesday, September 24, 2008
Former WorldCom chief executive Bernie Ebbers is serving 25
years in prison.
Enron's Ken Lay is in his grave.
Joe Nacchio, the former CEO of Denver-based Qwest, is still on
trial for his alleged crimes of the same era.
Nacchio was convicted in April 2007 on 19 counts of illegal
insider trading for transactions that occurred as far back as
In March, the 10th Circuit Court of Appeals in Denver ordered a new trial after finding that
the trial judge improperly excluded expert testimony.
On Thursday, a broader panel of appellate judges will review
Much of what Nacchio, Ebbers and Lay did was proclaim that their
companies were performing well, even though they were really
We have seen this misleading behavior again from the top
executives of every decimated investment bank. We've seen
it from our leaders, too. Treasury Secretary Henry
Paulson, Federal Reserve Chairman Ben Bernan ke, Securities and
Exchange Commission Chairman Christopher Cox, President Bush —
they all told us the banking system was safe, even as they
scrambled up bailouts.
Is delusional optimism a crime? Should every cheerleader
It's great drama to watch them squirm in court. But
shouldn't we also hear their defense?
Nacchio never got to put on much of his defense.
He called one expert witness: Daniel Fischel, a Northwestern University
law professor who had testified on behalf of savings-and-loan
kingpin Charles Keating as well as Enron's Lay and Jeff
Fischel was to address whether the information Nacchio had in
his skull as he traded his stock fit the legal standard of
"material," which is probably the most crucial question in an
The appellate court ruled Fischel's testimony was improperly
excluded, and it will revisit this question again Thursday.
And what was this material information? Prosecutors
alleged it was Nacchio's knowledge that his own revenue
projections would not come true.
They argued that as Nacchio boasted about Qwest's prospects, he
sold $52 million worth of stock. It was the old pump and
dump. But then, Nacchio had so much stock, he was almost
always dumping, mostly through pre-announced trading programs.
The jury never really heard why Nacchio boasted so loudly about
Qwest's prospects, because much of Nacchio's defense was deemed
Nacchio claimed he expected Qwest to meet its aggressive growth
targets with government contracts to build
In court filings that were unsealed after his trial, Nacchio
said he met with top officials of the National Security Agency
in Fort Meade, Md.,
on Feb. 27, 2001. Much of these filings have been
redacted, but they cite a system that NSA could use to "tap any
phone line and to monitor any digital transfer of information."
Nacchio's defense would have gone like this: The
government wanted to tap Qwest's phone lines without a warrant;
Nacchio said no, so the government retaliated by killing
billions' worth of top-secret contracts and slapping Nacchio
with insider-trading charges after his company subsequently
It became, as some have said about Bear Stearns, a run on the
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