Prosecutors haven’t said whom they will call to testify against Joe Nacchio, but the list may include former Qwest executives and board members who witnessed the company’s financial implosion when Nacchio was chief executive up until mid-2002.
In a bare-bones indictment Tuesday, the government alleged that Nacchio knew that Qwest was underperforming when he sold $100.8 million worth of stock from January through May 2001.
Anyone at the company who might have known about deals made to pump up revenues – or Qwest’s financial health – could be a witness, said Tony Leffert, a former federal prosecutor and a lawyer with Robinson, Waters & O’Dorisio in Denver, who isn’t involved in the case.
Almost certain to take the stand in Nacchio’s trial is former Qwest chief financial officer Robin Szeliga, who pleaded guilty to illegal insider trading in July and agreed to cooperate with the government.
“The CFO should be central to the events. If the CFO doesn’t know what is going on in a company’s finances, who on God’s green earth would?” asked Carr Conway, director of forensic accounting at the Dickerson Group in Lakewood.
Afshin Mohebbi, who was Qwest’s president under Nacchio, has been granted immunity for his cooperation, according to sources close to the case.
If Mohebbi has escaped prosecution in return for taking the stand, he will be a star witness, Leffert said.
“For someone in his position to not be charged or plead guilty to any crime would indicate that he probably has significant evidence about others,” said Leffert.
Former Qwest board member Tom Stephens, who formerly headed Qwest’s audit committee, identified problems in a swap of fiber-optic capacity between Qwest and Global Crossing.
“This one stinks,” he wrote in a note in April 2001 that became part of the public record during congressional hearings.
Stephens went on to push for an internal investigation that led Qwest to restate revenues of $2.5 billion for 2000 and 2001.
“(Stephens) would have knowledge of what was truly known internally and what was told to the public,” Leffert said.
Stephens – as well as attorneys for Szeliga and Mohebbi – was not available for comment Tuesday.
The Justice Department previously indicted former Qwest vice president Marc Weisberg on allegations that he secretly took $3 million worth of stock from Qwest vendors for himself and others. Weisberg has pleaded not guilty.
Prosecutors have said the Weisberg case was an offshoot of the larger Qwest investigation and that the Weisberg and Nacchio cases aren’t closely related in substance, making Weisberg an unlikely witness against Nacchio.
In a separate case, prosecutors previously wrung an agreement to cooperate from former Qwest senior vice president Thomas Hall and Grant Graham, the former chief financial officer of the company’s global business unit. The two men were accused of participating in a scheme to improperly inflate Qwest’s revenues by $34 million in 2001.
Whether they take the stand may depend on how much they know about the activities that led to Nacchio’s indictment, said John Walsh, a former federal prosecutor in private practice with Hill & Robbins in Denver.
A number of former Qwest executives have settled with the Securities and Exchange Commission after they were named in a civil accounting- fraud case. The SEC said their actions allowed Qwest to improperly report approximately $3 billion in revenue that helped bolster Qwest’s stock, helping complete its 2000 acquisition of U S West Inc.
They are: Greg Casey, former executive vice president of wholesale market; former pricing manager Roger B. Hoaglund; former senior vice president of finance William Eveleth; and former controllers Mark A. Schumacher and Bryan K. Treadway. Each has agreed to cooperate with the SEC in its investigation of the Qwest case.
But legal experts say that doesn’t guarantee they have a similar agreement with the Department of Justice that would make them witnesses in the criminal case against Nacchio.
Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com.
