Claims of secret government work may be key to the defence of former Qwest boss Joseph Nacchio as he fights insider-trading charges, starting tomorrow, in one of the last major trials arising from the spate of corporate scandals five years ago.
The 57-year-old former chief executive of Qwest Communications International is accused in a 42-count indictment of selling $100 million worth of Qwest stock in 2001 after being warned months earlier by company insiders that the telephone company could not meet its aggressive financial projections.
But Mr Nacchio is arguing he was optimistic about the company because he was privy to classified information that Qwest was in line for lucrative national-defence contracts with clandestine government agencies that would boost the bottom line.
"This will be a very close case," said Denver defence attorney and legal analyst Scott Robinson. "The wild card in this is the national security evidence," he added. Mr Nacchio in theory faces a life sentence if convicted on all counts, but under federal sentencing guidelines he would likely face a maximum 10-year prison sentence.
Prosecutors are demanding he also forfeit the $100 million he made in the alleged insider trades.
Mr Nacchio has also said in court filings that he unloaded the Qwest shares because financial advisers urged him to diversify his holdings.
The investigation started amid widespread crackdowns on corporate fraud, which led to prosecutions of top executives at companies such as Enron and WorldCom.
The nation's third-largest regional phone carrier, Denver-based Qwest has faced a slew of legal actions related to Mr Nacchio's five-year tenure at the company. During that time, prosecutors and regulators allege Mr Nacchio presided over a $2 billion accounting scandal.
The company ultimately restated $2.2 billion in revenue for 2000 and 2001 after the accounting irregularities came to light, triggering legal action against Qwest and its former executives.
The company has faced lawsuits from the US Securities and Exchange Commission and shareholder groups, including several large pension funds. The SEC and some shareholders have settled with the company, but lawsuits against Mr Nacchio and other former executives are on hold during the criminal trial.
"Joseph Nacchio is the poster boy for corporate gluttony and greed," said Curtis Kennedy, a Denver lawyer who represents retired workers at US West, a Baby Bell phone company that was absorbed by Qwest when the company was formed. "Some people lost all of their retirements when the stock tanked." Jury selection for the anticipated 7½ week-trial is scheduled to begin tomorrow in the courtroom of US District Judge Edward Nottingham.
Neither government nor defence attorneys would comment on the eve of trial.
"This case involves complex, high-level boardroom deals," said Bob Grant, longtime Colorado prosecutor and current law professor at Denver University. "The challenge for the government is to boil it down so your man-on-the-street juror can follow it." - ( Reuters)
