Former Qwest CEO Is Indicted
In a victory for federal prosecutors, former Qwest Communications International Inc. Chief Executive Joseph Nacchio was indicted Tuesday on 42 counts of insider trading that accused him of illegally selling $101 million in stock after learning the company might not meet its financial goals.
Nacchio, 56, appeared in court a few hours after the indictment was announced and pleaded not guilty before being led away in handcuffs. Freed a short time later on $2-million bond, he told reporters he was relieved to finally see the case against him.
“It’s pretty tough for four years to have to sit back and let everybody take shots at you,” he said outside the federal courthouse a short walk from Qwest’s headquarters in Denver.
The criminal charges are the first against Nacchio in the government’s lengthy investigation of Qwest, the telephone service provider for 14 mostly Western states that only now is recovering from a multibillion-dollar accounting scandal.
The charges come nearly three years after then-Atty. Gen. John Ashcroft announced the first indictments in the Qwest investigation, calling it an example of the government’s intolerance of white-collar crime.
With Nacchio’s indictment, U.S. Atty. William Leone said, that investigation is virtually complete.
“It’s important for corporate executives to recognize that when they’re in possession of information that the general public is not in possession of, they’re under a duty to abstain from trading,” Leone said. “Failure to honor that rule impairs confidence in our markets.”
Each count carries a penalty of as much as 10 years in prison and a $1-million fine.
Nacchio also faces fraud charges filed by the Securities and Exchange Commission and a number of private lawsuits.
The indictment accuses Nacchio of selling $101 million worth of company stock in the first five months of 2001 when he allegedly had insider information.
The sales took place in 42 transactions ranging from $191,000 to $13.6 million each.
The indictment blames Nacchio for “a manipulative and deceptive” scheme to commit fraud and says he was “specifically and repeatedly warned” about the financial risks facing his company just five months before the stock trades in question.
Prosecutors declined to discuss who allegedly warned Nacchio about revenue problems at Qwest or who might testify at trial. Leone said about 13 million pages of documents would be turned over to defense attorneys.
The government has said in both civil and criminal complaints that Qwest and some of its former executives participated in a massive financial fraud between April 1999 and March 2002 by falsely reporting one-time sales or trades of capacity on its fiber-optic cables as recurring revenue.
