The government appeared poised late Monday to file a criminal indictment today against former Qwest chief executive Joe Nacchio, according to sources familiar with the case.
Prosecutors had planned to file the indictment Monday in federal court but delayed the action. Sources said there had been disagreement within the Justice Department over whether to make the announcement in Denver or in Washington.
Announcements may be made in both locations and could come as early as this morning. Details were still being worked out Monday that could delay a filing, a source said.
Also being worked out Monday were arrangements for Nacchio’s arrest. It appeared likely that Nacchio, who lives in New Jersey, would surrender to federal authorities in Colorado as early as today.
It wasn’t known whether the grand jury returned an indictment Monday to be filed by prosecutors today, or whether the jury would meet this morning to sign off on the document.
The government has said its investigation focuses on insider trading and securities disclosure issues from 2000 to 2002.
Nacchio representatives have said consistently that he did nothing wrong at Qwest and will vigorously defend himself. An attorney for Nacchio declined to comment Monday night.
Nacchio could appear before a federal judge in Denver as early as today to be advised of the charges and have bail set. His arraignment, in which he would enter his plea, could occur then or at a later date.
If convicted on insider-trading charges, Nacchio could face up to 10 years in prison, a $1 million fine and restitution of ill-gotten gains for each count.
Jeff Dorschner, spokesman for the U.S. Attorney’s Office in Denver, which is heading the investigation, declined to comment.
Nacchio was CEO of Qwest from 1997 to mid-2002, when he was forced out as the company’s stock price plunged and an accounting scandal grew.
The potential indictment comes more than three years after federal authorities began a criminal probe into accounting improprieties at the Denver- based phone company.
Prosecutors, who face a five- year statute of limitations to file insider-trading charges, have focused on a period during April and May 2001. Qwest’s financial problems were mounting and Nacchio’s executive team scrambled to reassure investors and analysts that the company would continue to prosper.
On April 24, Qwest officials predicted 12 percent to 13 percent revenue growth for the year even as Qwest competitors’ sales were stalling.
Nacchio and his team had rushed to book questionable one-time deals before the end of the first quarter to meet Wall Street’s earnings forecasts, according to federal regulators.
During the last six days of April, after he reassured Wall Street, Nacchio sold $30 million in Qwest shares. In May he sold $21 million, his last sales of Qwest stock as a company officer.
In July of this year, former Qwest chief financial officer Robin Szeliga pleaded guilty to insider trading stemming from her sale of 10,000 shares of company stock in late April 2001 for a net gain of $125,000. She admitted that she knew at the time that the company’s finances were shakier than she had portrayed to investors. She is cooperating with authorities and is likely to testify for the government.
The Securities and Exchange Commission sued Nacchio and other former Qwest executives in March, accusing them of profiting from a scheme to fraudulently boost revenues by $3 billion. Nacchio denies those allegations.
