DENVER-
Joe Nacchio relied on banking studies and estimates from two executives, who later testified against him, when he set 2001 financial targets for Qwest Communications, the former CEO’s attorney told jurors Wednesday.
During a closing argument that lasted more than five hours, defense attorney Herbert Stern displayed financial data and memos and read the testimony of witnesses back to jurors to counter allegations that Nacchio illegally dumped $101 million in company stock because he knew Qwest’s finances were buckling.
Prosecutors said Nacchio painted a robust picture of the company’s health for investors as he feverishly sold his own shares.
Prosecutor Cliff Stricklin, in his rebuttal, said Nacchio used information investors didn’t have to get rich.
“He chose to cheat in order to make a lot of money,” Stricklin told jurors. “The only thing that stands between him and that money is you. You have the power to set the standards of justice in this community.”
After a long day of hearing attorneys argue their points, jurors were released for the day and will return Thursday to hear instructions before they begin deliberations.
Referring to memos and e-mails written by former Chief Financial Officer Robin Szeliga and former President Afshin Mohebbi, Stern noted both said the company would meet financial targets for the first and second quarters of 2001, which it achieved.
Executives and business unit managers addressed what-if scenarios in an “if this happens, if that happens” fashion, Stern said. “That’s not material, nonpublic information.”
Stern said the government failed to prove Nacchio used such information in deciding to sell stock. He said nobody, including Nacchio, could have predicted how Qwest’s stock would fare in the economic downturn that hit the United States in 2001, both before and after the Sept. 11 terror attacks.
Prosecutor Colleen Conry on Tuesday said Nacchio sold shares faster than ever before in the first half of 2001 because he knew the company was in financial trouble. She told the jury that business unit managers warned Nacchio that the company was relying too heavily on one-time sales.
The stock transactions include two sales in early January 2001 that consisted of so-called growth shares, representing money due to Nacchio under the terms of his employment contract.
A document suggests that Nacchio, 57, signed an irrevocable commitment to sell the shares late in 2000, but prosecutors allege that he backdated that document from December to November—before Qwest’s stock price dipped.
However, Stern said Nacchio had no reason to backdate the contract because, unlike stock options, the shares represented the amount of money due Nacchio so the price was irrelevant.
Seated at the table between attorneys and facing the jury, Nacchio grew emotional and, at one point, wiped his eyes as Stern said his client wanted to resign as chief executive officer when the sales began because his son, David, attempted suicide and was hospitalized.
Stricklin, too, referred to David Nacchio’s hospitalization and asked jurors to rely on the facts and not their emotion when they begin deliberations.
He also mentioned Nacchio was an entrepreneur who followed an American dream to make a lot of money. “I don’t want you to convict Joe Nacchio because he is a rich man. I want you to convict him in the end because of the evidence we’ve shown you,” he said.
Nacchio, who joined Qwest Communications International Inc. prior to its merger with former Baby Bell U S West Inc. and resigned in 2002, is charged with 42 counts of insider trading; each carries a penalty of up to 10 years in prison and a $1 million fine.
The government’s criminal case against Nacchio was spawned by a federal investigation into a multibillion dollar accounting scandal at Qwest, a 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 report about $3 billion in revenue, which helped pave the way for its acquisition of U S West, regulators have alleged.
Qwest later restated about $2.2 billion in revenue.
