Former Qwest CEO guilty of insider trading
Joseph Nacchio, the former CEO of Qwest Communications International was found guilty of 19 counts of insider trading. He was acquitted on the other 23 counts charged.The crux of the Nacchio case was whether or not he knowingly and willfully sold Qwest stock while he had access to insider information. Nacchio said he did not – that he was distracted by his son’s suicide attempt and wasn’t focused on the stock sales.
The jurors heard evidence, however, that on an April 2001 investor call, Nacchio withheld certain information that would have shown Qwest was in danger of not reaching earnings targets. A few days later, Nacchio was selling his stock.
Also presented at the trial was evidence that Nacchio was attempting to prop up the stock with “questionable” accounting practices, including counting one-time revenue swaps with other companies as long-term revenue. The prosecutors, however, could not tell the jury that Qwest restated the financial statements by $2.48 billion in 2000 and 2001.
Nacchio’s defense was that his stock sales were no different compared to his past stock activity. His defense attorneys also tried to show that Nacchio was overcome by family issues and did not focus on propping up the Qwest stock price for his own benefit.
Nacchio faces up to life in prison, but legal experts say he will get less. Each guilty count also carries a fine of at least $1 million, and Nacchio might have to give up the $52 million gross proceeeds of the stock sales on which he was convicted. Nacchio’s lawyer says they will appeal.
