DENVER—Qwest Communications shareholders who purchased stock when Joe Nacchio sold shares illegally in 2001 will be allowed to testify during the former CEO’s sentencing, a judge ruled Monday.
U.S. District Judge Edward Nottingham will set aside 1 1/2 hours to hear from victims before he sentences Nacchio Friday for insider trading. He told prosecutors to handle coordination of those who want to speak.
“It would appear to the court that any person who bought Qwest shares on the days when (the) defendant was selling the shares could reasonably be regarded as a victim of the offense, assuming the purchaser’s circumstances were such that a loss were suffered,” Nottingham wrote.
Mimi Hull, president of the Association of U S West Retirees, said she has notified her members about Nottingham’s decision. “I think the judge is being very smart in using a very narrow criteria because of the obvious attempts at appeal,” she said.
A federal jury convicted Nacchio in April of insider trading based on $52 million worth of stock transactions he completed in April and May 2001. Prosecutors said he knew the company was at financial risk but didn’t tell investors.
Prosecutors have recommended a maximum of seven years and three months in prison for Nacchio, a maximum fine of $19 million and forfeiture of $52 million in assets.
Stern has asked for an unspecified lesser sentence which he said was warranted because of the “extraordinary circumstances” concerning the effect a lengthy prison term would have on the health of two of Nacchio’s family members.
One relative is Nacchio’s son, David, whose suicide attempt prompted his father to consider resigning in January 2001, according to trial testimony. Defense attorneys pointed to that emotional time for Nacchio as part of their argument Nacchio was not guilty.
Stern said in a brief filed Monday a separation from his father would have a “potentially catastrophic effect” on David Nacchio, noting his doctor already has seen David Nacchio becoming increasingly disturbed by public reports detailing his condition and treatment.
Prosecutor Kevin Traskos has asked Nottingham to subpoena David Nacchio’s medical records so they could respond to the defense request for a lighter sentence.
Defense attorneys have refused to provide the records, Traskos said. “Nacchio has put his son’s medical condition in issue,” he wrote in a brief filed late Friday.
Stern countered in his brief that the defense does not have an obligation to produce the records because they do not plan to call David Nacchio’s doctor during the sentencing. He suggested the documents could be turned over to the judge for review and then given to prosecutors if the judge deems it appropriate.
Stern asked that prosecutors be required to get the judge’s permission to file a public motion about the issue.
Nacchio remains free on bail pending the sentencing, and has said he will appeal the conviction.
Each insider trading count carries a penalty of up to 10 years in prison and a maximum fine of $1 million, but the sentence will be adjusted under federal sentencing guidelines that take into account actions that either made the situation worse or better.
The stock sales at issue in Nacchio’s case came amid a federal investigation into a multibillion-dollar accounting scandal at Qwest Communications International Inc., a Denver-based telecommunications company that is the primary telephone service provider in 14 mostly Western states.
Share prices for Qwest plummeted from more than $60 a share in 2000 to just $2 a share in 2002, and its near-collapse left thousands of pensioners in financial straits.
Separately, Nacchio and four other one-time Qwest executives are involved in a pending civil fraud lawsuit that accuses them of orchestrating a financial fraud that forced the Qwest to restate $2.2 billion in revenue.
