If he’s convicted of all 42 insider-trading counts against him, former Qwest chief executive Joe Nacchio could wind up paying much more than the $100.8 million in 2001 stock sales cited in the indictment.
For one thing, there would have been capital-gains taxes on the Qwest stock he sold from January to May 2001. The tax rates were 20 to 39.6 percent during that period, said IRS spokesman David Stell in Oklahoma City.
But federal prosecutors are seeking the entire $100.8 million to partially reimburse shareholders of Qwest, the dominant phone company in Colorado and 13 other states.
The government also seeks $42 million in fines to go to a general victims fund ($1 million for each count) and $4,200 for a special victim assessment fund, said Jeff Dorschner, spokesman for the U.S. attorney’s office in Denver.
Nacchio also faces up to 10 years in prison for each of the 42 counts. Nacchio pleaded not guilty Tuesday to the insider- trading charges and is free on $2 million bond.
Nacchio was forced out of Qwest in 2002, and the company ultimately reversed $2.5 billion in revenues.
At his client’s initial appearance this week in U.S. District Court in Denver, attorney Herbert Stern complained that federal prosecutors, in coming up with the $100.8 million figure, did not take into account how much Nacchio paid for the stock.
Shares granted as options require option holders to pay a fee, called a “strike price,” before they can be exercised. Once a strike price is set, the employee can buy any of the vested options at that price, regardless of the market price for those shares.
Although Nacchio sold $100.8 million worth of stock, the U.S. attorney’s office, which is prosecuting Nacchio, and the Securities and Exchange Commission office in Denver declined to say how much Nacchio profited from the sales in question.
“The forfeiture allegation in the indictment speaks for itself,” Dorschner said.
Former Qwest chief financial officer Robin Szeliga, who is expected to testify against Nacchio, pleaded guilty earlier this year to using inside information in April 2001 to net pre-tax profits of $125,000 on the sale of Qwest stock.
Staff writer Beth Potter can be reached at 303-820-1503 or bpotter@denverpost.com.
