The thousands of Coloradans who suffered financially from the near-collapse of Qwest Communications at the start of the decade are undoubtedly taking some measure of satisfaction from a federal jury’s decision Thursday to convict former Qwest chief executive officer Joe Nacchio of 19 of 42 counts of insider trading.
Though a more detailed examination of the verdicts will unfold in coming days, it’s apparent the jury took to heart testimony that Nacchio received repeated warnings from Qwest executives in 2001 that the company was not going to hit aggressive earnings targets.
Nevertheless, executives stayed publicly quiet about the precipitous state of company finances, and Nacchio began dumping his own Qwest stock – $100.8 million between January and May 2001.
In April 2001, Nacchio got several strong warnings from company executives that the one-time sales of network capacity that the company had been relying on to make financial targets had dried up. The jig was up, it would have seemed, but it wasn’t until September of that year that the company publicly acknowledged looming financial problems and lowered its stock guidance.
Federal prosecutors had a difficult task before them in proving Nacchio’s intent in selling the stock. During the five-week trial, they called numerous company officials to the stand to speak to what they told Nacchio and when.
The 12-person jury deliberated for six days. Clearly jurors took their duty seriously, spending a significant amount of time away from their normal lives parsing the evidence and the charges before coming to their decision.
Nacchio faces up to 10 years in prison and a $1 million fine for each of the guilty verdicts. His lawyer immediately announced Nacchio would appeal the decision, so this saga is likely to continue for years.
The case is among the last of a wave of high-profile insider cases to be pursued by federal prosecutors. Its outcome is sure to be pored over for corporate lessons to be learned, as were the cases that snagged top executives of Enron, Adelphia Communications, Tyco International and WorldCom.
But the initial analysis began almost immediately.
“Nothing short of a level playing field will be tolerated,” said Colleen Conry, a federal prosecutor who worked on the case, as she stood outside U.S. District Court in Denver.
While the verdicts will not restore retirement funds lost when Qwest stock plunged or mend careers broken by job losses, there is satisfaction to be had in a well-managed trial and the careful work of a jury.
