An airline pilot. A masonry contractor. An electrician/rancher. A maintenance supervisor. A power-equipment operator. A retired furniture-store owner. A child-care worker. A registered nurse.
This list goes on, but it’s safe to say the people who will decide Joe Nacchio’s fate are not a jury of his peers.
Nacchio lives and operates in a realm of corporate wealth and entitlement unknown to those who could send him to jail for illegal insider trading. Maybe that isn’t American justice, but it sure is poetic justice.
The implosion of Qwest stock emptied retirement plans of thousands of one-time workers from Qwest and US West, a telecom company that Nacchio gobbled up in 2000. The stock’s free fall also slammed hundreds of thousands of shareholders worldwide. Those are the people who deserve to judge Nacchio, not other overindulged, golden-parachuted executives.
Nacchio got his when he sold $100.8 million in company stock before Qwest tanked. Guys like Juan Garza got theirs, too, but in a different way. Garza, 57, a Qwest retiree, said the company would not let him sell his shares when he wanted.
“The stock was at $72 a share when I wanted to take my money,” Garza said, standing outside a federal courtroom. “When they allowed me to sell, the stock was at $39.”
It eventually shrank to $1.11.
Nacchio “left such a mess” that health-insurance premiums had to go up and life insurance had to be cut, claimed Garza.
Nacchio’s decision to push overly optimistic revenue projections to stock analysts and investors hurt a lot of people. The company eventually had to restate its revenues by more than $2 billion. The ripple extended far enough to even touch one of the people selected to the jury.
That juror knows a pair of US West retirees who had to return to work after the stock that was supposed to pay for their retirements became worthless.
Nacchio will be judged by people whose view of executive privilege doesn’t extend to endless entitlement.
In opening statements Tuesday, prosecutors said they would call former Qwest execs to testify that they told Nacchio his 2001 growth projections were a “huge stretch,” perhaps $1 billion short of a best-case scenario. Prosecutors also will try to convince jurors that Nacchio sold Qwest stock worth $100.8 million while trying to keep Wall Street from finding out how much trouble he already knew his company was in. The government even says Nacchio put a fake date on a document to keep from being charged with insider trading.
“This case,” Assistant U.S. Attorney James Hearty told the jurors, “is about cheating.”
The defense, meanwhile, will ask the jury to believe that the disputed growth projections were for an internal budget. That budget, defense lawyer Herbert Stern insisted, was different from Nacchio’s public assurances of fiscal health to Wall Street. Some of the stock, the defense will argue, was sold to produce $24 million owed to Nacchio by Qwest founder Philip Anschutz.
“It didn’t matter if the stock sold for 10 cents a share,” said Stern. “He’d get the same amount of money.”
Nacchio’s stock options weren’t dumped, Stern added. They had to be exercised or lost. Of course, Stern also told jurors that Nacchio “never got a big salary.”
Maybe not by the standards of executives who think the $600,000 to $1.5 million annual salary Qwest paid Nacchio is chump change.
Fortunately, this case won’t be settled by multimillionaires.
The airline pilot, who watched his employer, United Airlines, go bankrupt, said it best. Asked by federal Judge Edward Nottingham how he felt about high pay for big corporate executives, the man replied:
“I have no problem as long as they are returning equity to the shareholders.”
If Joe Nacchio goes down, that will be why: After he cashed in his $100.8 million in stock, too many of his shareholders and employees lost everything.
Jim Spencer’s column appears Monday, Wednesday and Friday. Reach him at 303-954-1771, jspencer@denverpost.com or blogs.denverpost.com/spencer.
