DENVER—The government’s insider trading case against Joe Nacchio was built on flawed arguments about financial targets and what information was relevant when the former Qwest Communications CEO sold stock in 2001, his attorney argued.
In a 42-page brief filed late Tuesday, attorney Maureen Mahoney contended prosecutors misrepresented testimony about internal versus public revenue targets and the importance of forward-looking predictions.
Nacchio is appealing his April conviction on 19 counts of insider trading. Tuesday’s filing was part of the preparation for oral arguments in the case before the 10th U.S. Circuit Court of appeals on Dec. 18.
In her filing, Mahoney said prosecutors erroneously suggested information about one-time sales revenue combined with fewer-than-projected new customers played a role in Nacchio’s decisions.
“If such matters were material, then no corporation or corporate manager could buy or sell stock ever,” Mahoney wrote.
Mahoney also argued an expert defense witness was erroneously denied the chance to testify and the jury received improper instructions.
At his trial, a jury concluded Nacchio sold $52 million worth of stock when he knew Denver-based Qwest Communications International Inc. was at financial risk but didn’t tell investors. The jury acquitted Nacchio of 23 counts.
Nacchio has been sentenced to prison for six years but remains free on bail pending the outcome of his appeal.
Earlier this month, prosecutors asked the court to uphold Nacchio’s conviction, saying he knew the telecommunications company was relying heavily on one-time sales and that his managers were worried about meeting revenue targets, but he lied to investors about the situation.
Defense attorneys have insisted Nacchio set higher internal financial projections to push executives into performing better. Several business unit managers testified they were concerned Qwest would be unable to meet those internal revenue targets.
The case grew out of a multibillion-dollar scandal that forced the telecommunications company to restate $2.2 billion of revenue. Federal regulators have said Qwest falsely reported fiber-optic capacity sales as recurring instead of one-time revenue between April 1999 and March 2002.
A civil fraud lawsuit is still pending against Nacchio and four other one-time Qwest executives, alleging they orchestrated financial fraud that led to the scandal.
The Securities and Exchange Commission is seeking repayment and civil penalties, with the amounts to be determined at trial.
