Bad times loom for former Qwest CEO Joe Nacchio. The Rocky Mountain News reports he may indicted as early as today.
Some expected an indictment when the grand jury met a month ago, but prosecutors instead used the time to bolster their case against Nacchio, sources said. One source indicated the delay was largely due to a new defense strategy floated about a month ago by Nacchio's new legal team, which is led by former federal judge Herbert Stern. Stern hasn't returned numerous phone calls for comment.
As to the case against Nacchio:
Prosecutors are believed to be focusing primarily on the spring of 2001, when Nacchio sold nearly $50 million of Qwest stock in a three-week flurry. The stock sales came after Qwest posted double-digit revenue growth in its first quarter at a time other telecommunications companies were weakening. Qwest stock, which reached a high of $66 in March 2000, began to slide dramatically in the summer of 2001 after analysts became increasingly skeptical of the company's financial results.
As 5280 suggested here, the case against Nacchio may depend significantly upon the testimony of former Qwest Chief Financial Officer Robin Szeliga, who pleaded guilty last year pursuant to a plea agreement which provided for a sentencing reduction in exchange for her cooperation.
It appears Joe Nacchio may be indicted by the end of this year, through an assist from cooperating defendant Robin Szeliga.
The Rocky article linked above indirectly confirms this today:
In her plea agreement, Szeliga said other unnamed senior executives knew by at least April 24, 2001, that Qwest's financial results were buoyed by questionable one-time deals, such as communications capacity swaps, that weren't disclosed to investors. Szeliga is expected to be a key government witness if Nacchio is indicted.
How will Nacchio respond to the charges?
In court filings earlier this year, Nacchio's attorneys argued that at most he was guilty of corporate optimism or "puffery."
While every drug defense lawyer I know has tried to sell this defense at one time or another, most have failed. Will a white-collar defendant like Nacchio fare any better with it? Stay tuned.
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