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Denver is hosting a high-profile criminal trial beginning tomorrow. It’s United States v. Joseph Nacchio. Nacchio is the former CEO of Qwest communications. He’s charged with 42 counts of insider trading resulting from his sale of $101 million of Qwest stock in 2001. The Government alleges he sold the stock because he knew there were big problems with Qwest meeting its financial projections.
Nacchio says nonsense. He was over-invested in telecommunications stocks and these were planned, timed sales. Plus, and this is the novel part, by virtue of serving on some Homeland Security subcommittees, he was privy to classified information showing Qwest was in line for some big Government contracts which would have made Qwest a ton of money. Thus, he did not sell because he thought Qwest was doomed.
It’s the state of mind defense (like Libby in a way.)
There’s a lot of local interest in this trial because many of the U.S. West retirees (Qwest bought U.S. West in the late 1990’s) lost a lot of money when Qwest’s stocked tanked to under $2.00 a share.
Qwest’s stock price hovered around $35 to $40 a share from January 2001 to May 2001, which is the time period of the alleged illegal insider trading. The stock eventually plummeted to an all-time low of $1.11 a share in August 2002.
As to what it meant to shareholders and retirees:
Nacchio made more than $200 million from exercising stock options during his tenure, and the government is asking that he forfeit $100.8 million of those proceeds.
Many retirees, meanwhile, have lost hundreds of thousands of dollars each, some virtually their life savings as Qwest stock dropped to barely a dollar in August 2002. Collectively, stockholders have lost billions, and most will recover only pennies on the dollar through civil settlements. Civil-action fraud claims against Nacchio are pending.
Also, there was a first round of criminal trials involving Qwest officals a few years ago and it was a disaster for the Government. They lost the jury through their over-emphasis on minute accounting details. There were acquittals and mistrials and then guilty pleas resulting in probation. In other words, no one went to jail.
The Nacchio trial promises to be simpler. There’s a new prosecutor on board — Clifford Stricklin from Texas who was on the Ken Lay/Jeff Skilling Enron team. Colorado U.S. Attorney Troy Eid brought him in as his First Assistant, after which Bill Leone, who had served as Interim U.S. Attorney for a year and a half while the White House sat on its a** not naming a new U.S. Attorney following the departure of U.S. Attorney John Suthers, who left to take Ken Salzar’s place as state Attorney General when Salazar got elected to the Senate, and who had prosecuted the first Qwest case, resigned. So, although Stricklin is from Texas, he now lives here and is a permanent part of our U.S. Attorney’s office. The other prosecutors are from DOJ in D.C.
The defense is led by Herbert Stern of New Jersey, a former federal judge and prosecutor. Co-counsel is John Richiliano of Denver and his partner Marci Gilligan.
The Judge is Edward Nottingham. Here’s what the courtroom will look like.
I have a press pass and will be covering jury selection and opening arguments and days when there is key testimony from the cooperating witnesses who got immunity, and perhaps other days, for 5280.com.
As to who else is covering the trial, it will be the Wall St. Journal, Bloomberg, Business Week, NPR, the Rocky Mountain News and the Denver Post.
Personally, I have no opinion of Nacchio although the news reports say he’s reviled here. While I know his local defense lawyers, they are not personal friends– just professional colleagues. I’ve known the Judge since he was a federal prosecutor. I always have a few cases in front of him at any given time. He knows I’ll be reporting on the trial. He’s very strict, so I will take extra care not to violate his trial rules.
The media can bring laptops into the courtroom and the overflow media rooms, so I will be live-blogging. I hope you’ll join me.