A summary of key testimony from witnesses in the insider trading trial against Joe Nacchio, former head of Qwest Communications International Inc.:
Lee Wolfe, ex-senior vice president of investor relations; had a grant of immunity: Testified Nacchio confirmed Qwest was growing while competitors were concerned there wasn’t enough business; that when he asked Nacchio what he should tell analysts: “Basically he was going, ‘Screw them (analysts), go tell them to buy.'” Nacchio had a “golden rule” at Qwest: Never do anything that would hurt the stock price. Wolfe sold 20,000 Qwest shares from January through April in 2001 for a net gain of $646,000.
Craig D. Slater, ex-Qwest director: In the fall of 2001, the board raised Nacchio’s annual salary from $1.2 million to $1.5 million and awarded him 7.25 million shares in stock options. It occurred about a month after Qwest made its first public announcement on the magnitude of one-time revenue used to help meet financial targets.
Robin Szeliga, ex-chief financial officer, serving probation on one count of insider trading for a sale in 2001, reached a settlement in SEC civil fraud lawsuit: Testified Nacchio put a top priority on meeting internal revenue targets. She argued with Nacchio for hours one night, trying to persuade him to reduce a 2001 public revenue forecast because of concerns it was unattainable. Nacchio reconfirmed Qwest’s guidance the next day.
Mark Schumacher, former controller, testifying under immunity from criminal prosecution, reached a settlement in the SEC civil fraud case: Decided against selling stock in the spring of 2001 because he was concerned Qwest was withholding information about nonrecurring revenue from the public.
Grant Graham, a former finance vice president for Qwest’s global unit, pleaded guilty in May 2004 to one count of accessory after the fact to wire fraud stemming from a Qwest deal: Testified unit managers were concerned about meeting 2001 financial targets, noting Qwest faced aggressive competition and was losing traditional phone service lines while the economy was slowing.
Gregory Casey, a former vice president of Qwest’s wholesale business unit, testified under a grant of immunity and reached an agreement in the SEC case: Said he projected $4.5 billion in revenue for 2001, believing everything would have to fall into place to meet the goal. Nacchio set the target at $4.9 billion. Casey referred to a final meeting on the 2001 budget as a “sign in blood” session where division managers committed to meeting targets. Casey exercised stock options in 2000, selling shares valued at $26.2 million in July after the U S West merger closed and additional shares in November valued at $1.5 million.
David Weinstein, a financial analyst who handled Nacchio’s investments: Testified about allegations that Nacchio backdated a document committing him to sell Qwest shares. He said Nacchio did not mention signing the document during a Nov. 2, 2000, phone call but did tell Weinstein on Dec. 9 that he was signing it. The document was dated Nov. 3, 2000.
Afshin Mohebbi, former president and chief operating officer, testified under a grant of immunity: Sent a series of memos warning Nacchio he was concerned about meeting 2001 financial targets and that one-time revenue would be needed to fill the gap. Some meetings grew heated as business unit managers tried to make targets set by Nacchio. On cross-examination, testified that he agreed with Nacchio setting internal targets higher than publicly stated guidance as a way to boost the performance of managers.
Drake Johnstone, a telecommunications analyst with Davenport & Co.: Testified that Qwest should have disclosed its reliance on one-time sales to meet revenue goals in the first half of 2001.
Prashant Khemka, a Goldman Sachs asset manager: Testified Nacchio said the company would achieve its projection of 15 percent to 17 percent revenue growth but that Nacchio did not explain Qwest would use a significant portion of one-time sales revenue to do so. Khemka said he became increasingly frustrated in 2001 when he could not get satisfactory answers about the company’s reliance on one-time sales.
Phil Anschutz, Qwest founder: Testified an emotional Nacchio broke down in tears and said he wanted to resign in January 2001 because one of his sons attempted suicide. Also described Nacchio’s employment contract, which included shares representing 3 percent of the company’s growth. The so-called growth shares are included in the government’s allegations that Nacchio illegally sold stock during the first five months of 2001 based on inside knowledge that Qwest would be unable to meet revenue targets.
The Rev. Giles Hays, a Roman Catholic abbot in Morristown, N.J.: Testified he urged Nacchio to stay with Qwest after his son, David, attempted suicide.
Daniel Fischel, an author and college professor: Testified 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’s testimony was designed to counter the prosecution’s contention that Nacchio accelerated his trades ahead of the worsening financial picture at Qwest.
