DENVER-
Defense attorneys rested their case in Joe Nacchio’s $101 million insider trading trial Monday without calling the former head of Qwest Communications to testify or mentioning top-secret government contracts.
The case could go to the jury by Tuesday evening after prosecutors call one additional witness to testify about a stock sale commitment document that they allege Nacchio backdated. It is scheduled to resume Tuesday afternoon.
In all, defense attorneys spent two days calling three witnesses in Nacchio’s defense.
Qwest founder Phil Anschutz and a Roman Catholic priest had testified that Nacchio wanted to resign in January 2001 at the time of the stock sales, while a college professor testified Monday about Nacchio’s pattern of stock sales.
Asked after trial recessed for the day why the defense rested, Stern replied: “If it ain’t broke, you don’t fix it.”
Nacchio, 57, is accused of selling stock in a series of transactions in the first five months of 2001 after learning from Qwest business managers that the company may have trouble meeting financial projections without relying heavily on revenue from one-time sales.
Defense attorneys have maintained the sales were legal because Nacchio was more optimistic about the company’s future and was required to exercise some stock options before they expired.
Before the trial, they also said Nacchio was alone among Qwest executives who knew about lucrative government contracts that Qwest could receive which would help its bottom line but no witnesses were called to describe them.
Stern made his decision to rest the case after U.S. District Judge Edward Nottingham agreed to allow prosecutors to reopen their case and recall financial analsyt David Weinstein to tell jurors more about an allegation that Nacchio backdated a document committing to sell shares.
The document is a memo that Weinstein wrote after he had a conversation with a Qwest attorney in December 2000 about Nacchio’s commitment to sell stock in early January 2001.
Stern tried to object to the decision, but Nottingham cut him short, noting that he gave defense attorneys the option to call the analyst on their direct case.
“You are not going to play that game with me,” he told Stern. “You are not going to play that game. I have ruled that it will come into evidence.”
Each of the 42 insider trading counts against Nacchio carries a penalty of up to 10 years in prison and a $1 million fine.
Earlier Tuesday, defense witness Daniel Fischel, an author and Northwestern University professor, testified Monday that Nacchio sold 12.6 percent of eligible stock options in the first quarter of 2001 and 22.8 percent of eligible options in the second quarter of that year.
That compared with 14.6 percent in the third quarter of 2000 and 14.5 percent in the fourth quarter of 2000, Fischel said.
Fischel’s testimony was designed to counter the prosecution’s contention that Nacchio accelerated his trades ahead of the worsening financial picture at Qwest. His calculations excluded so-called growth shares that Nacchio sold on Jan. 2 and Jan. 3, 2001.
Fischel told jurors that the defense paid him $25,000, or his going rate of $1,000 an hour, for research and testimony at the trial.
Last week, Anschutz testified Nacchio was ready to resign in January 2001 so he could remain in New Jersey with his family after one of his sons attempted suicide. The Rev. Giles Hayes, a Roman Catholic abbot in Morristown, N.J., testified that he had many meetings with Nacchio after his son, David, attempted suicide.
Prosecutors have alleged a document that committed Nacchio to selling stock was backdated after Nacchio learned about Qwest’s worsening financial condition. At issue are two stock sales Nacchio completed on Jan. 2 and Jan. 3, 2001, in which he sold 350,000 shares valued at a little more than $14 million.
They say Nacchio signed the document they say was created Dec. 13, although it is dated Nov. 3. Defense attorneys deny the backdating allegation.
Nottingham told prosecutors Monday they could recall Weinstein, a financial analyst who handled Nacchio’s investments, to testify about the document.
Weinstein previously testified that he and Nacchio discussed investment strategies in late 2000 for a large number of shares Nacchio was due to receive in early 2001. He said Nacchio did not mention signing the sale commitment document during a Nov. 2, 2000, phone call but did tell Weinstein on Dec. 9 that he was signing the document.
The criminal case against Nacchio stems from a long government investigation into an accounting scandal at Qwest, a Denver-based primary telephone service provider in 14 mostly Western states.
Federal regulators have said Qwest falsely reported fiber-optic capacity sales as recurring instead of one-time revenue between April 1999 and March 2002. The practice allowed Qwest to improperly report about $3 billion in revenue, which helped pave the way for its acquisition of U S West Inc., regulators have alleged. Qwest later restated about $2.2 billion in revenue.
The Securities and Exchange Commission has filed a civil fraud suit that is still pending against Nacchio and other former Qwest executives, alleging they orchestrated a financial fraud that led to the scandal.
