DENVER-
Defense attorneys continued presenting evidence in Joe Nacchio’s $101 million insider trading trial Monday as prosecutors mulled the judge’s offer to reopen their case so they could call a witness to testify about a document they say was backdated illegally.
Nacchio’s trial entered its fourth week with no word on whether Nacchio, who resigned from Qwest Communications International Inc. under pressure in 2002, will take the stand.
Prosecutors say Nacchio completed the stock sales between January and May of 2001 after learning from business managers that Qwest was at financial risk and could miss revenue targets.
They also have alleged a document that committed Nacchio to selling the 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.
Prosecutors have said Nacchio signed the document they say was created Dec. 13, although it is dated Nov. 3.
Defense attorneys deny the backdating allegation and have argued the stock sales were legal because Nacchio believed in the company’s future and was required anyway to exercise the stock options under the terms of his contract.
U.S. District Judge Edward Nottingham told prosecutors Monday they could reopen their case and recall David 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.
Nacchio, 57, is accused of illegally selling stock based on nonpublic information that the telecommunications company was at risk of missing targets in 2001 and used large amounts of one-time revenue to meet its projections.
Each of the 42 insider trading counts against him carries a penalty of up to 10 years in prison and a $1 million fine.
On the stand Monday, Daniel Fischel, an author and Northwestern University professor, testified 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 the so-called growth shares that Nacchio sold on Jan. 2 and Jan. 3 in 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.
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.
Nottingham on Monday questioned a juror about a conversation she reported having with someone, possibly a news reporter, who sought her opinion last week of how Nacchio’s trial was progressing. The juror was in her chair when the trial resumed and Nottingham asked the public to refrain from interacting with jurors.
