By Carrie Johnson
Washington Post Staff Writer
Friday, April 20, 2007
Joseph P. Nacchio, the telecommunications entrepreneur whose fortune swelled with the Internet boom, was convicted yesterday of 19 counts of insider trading for selling more than $50 million of Qwest Communications International stock when he knew the company's prospects were dwindling in 2001.
Nacchio, the former Qwest chief executive, did not take the witness stand to testify during the trial in Denver. The eight-man, four-woman jury acquitted him of 23 more insider-trading charges.
Jurors deliberated over six days to reach the verdict in a case that had been billed as one of the last vestiges of the overheated technology business cycle. The trial riveted residents of Denver, where thousands of jobs and millions of dollars in retirement savings were lost when Qwest's stock price collapsed six years ago.
The conviction was the latest in a series of government victories in a drive to police corporate malfeasance, including cases against former top officials at Enron, WorldCom, Adelphia Communications, and Tyco International.
"The term 'convicted felon' Joe Nacchio has a very nice ring to it," U.S. Attorney Troy A. Eid said. "This is an overwhelming determination of guilt."
Defense lawyers for Nacchio said they would appeal. His wife and son were in tears when the verdict was announced shortly before 7 p.m. Eastern time, the Associated Press reported.
A. Jeff Ifrah, a sentencing expert at the Greenberg Traurig law firm in Washington, predicted that Nacchio would face a prison term of 10 to 15 years under federal sentencing guidelines. Sentencing is scheduled for late July.
Before the trial began, Nacchio claimed in court papers that he had remained optimistic that Qwest would overcome stiff competition and weak sales because he was privy to top-secret information. He said that Qwest had been poised to win government contracts with defense agencies.
The legal argument required prosecutors to submit thousands of pages of classified evidence in filings for the judge's review. The strategy forced prosecutors to consume months and precious resources in behind-the-scenes pretrial maneuvers.
Most of the documents never made their way into the public sphere. Because of rulings by U.S. District Judge Edward W. Nottingham, the jurors heard little about the claims of secret government contracts.
The trial lasted 3 1/2 weeks, about half what both sides had expected.
Rather than mount a large-scale conspiracy case against Nacchio, the prosecution brought a narrow case that revolved around his personal wealth and stock trading.
Prosecutors slashed witnesses and evidence from their case, offering jurors a lean presentation starring a few central witnesses. Among them: Qwest's former finance chief Robin Szeliga and former president and chief operating officer Afshin Mohebbi, both of whom pleaded guilty and agreed to cooperate with the government.
Szeliga and Mohebbi testified that they repeatedly told Nacchio in early 2001 that Qwest's public financial projections were vastly overhyped, to no avail.
The government accused Nacchio of ignoring the warnings, failing to inform shareholders of mounting problems and then selling millions in stock to protect his own interests.
Prosecutor Cliff Stricklin pointed the jury to a document suggesting that Nacchio had backdated one order to sell stock to take advantage of negative business forecasts he did not share with the public.
"If you don't tell, you can't sell," Colleen A. Conry, a Washington-based Justice Department prosecutor, told the jury in her closing argument.
By contrast, Nacchio's defense was bare-bones. Lawyer Herbert J. Stern questioned three witnesses, including Philip Anschutz, the reclusive billionaire and owner of the Examiner newspaper chain. Anschutz had chaired Qwest's board of directors. He told the jury that Nacchio's attention was elsewhere in early 2001 because of an alleged suicide attempt by his son.
Defense lawyers also called an expert in trading patterns, who testified that Nacchio sold a relatively small amount of his stock options in 2001. His financial adviser had urged Nacchio to diversify his holdings, the defense team argued.
The hard-charging Nacchio left Qwest under pressure in June 2002 after five years as chief executive, stepping aside from an empire he had created by merging the company with US West and slashing more than 11,000 jobs in the process.
Qwest eventually restated $2.5 billion in revenue and agreed to pay $650 million to settle civil charges lodged by the Securities and Exchange Commission. Nacchio still must contend with a civil SEC case against him.