Apr 2, 2007 3:23 pm US/Mountain
Prosecutors Hope To Wrap Up Case In Nacchio Trial
By Sandy Shore, AP Business Writer
DENVER (AP) ―
Prosecutors hope to wrap up their insider trading case against former Qwest CEO Joe Nacchio this week after calling several managers who detailed financial challenges facing the company when Nacchio sold $101 million of stock in early 2001.
The trial was entering its third week Monday with Afshin Mohebbi, a former Qwest Communications president and chief operating officer, resuming testimony.
Prosecutors have told the judge they plan to finish their direct case by Wednesday or Thursday. The trial originally was estimated to last up to eight weeks.
Nacchio, 57, is accused of illegally selling stock while knowing nonpublic information that Qwest Communications International Inc. could have a difficult time meeting 2001 financial targets.
The risks were not released publicly until August of that year despite a growing chorus of then high-ranking executives who warned Nacchio that the goals were unrealistic given aggressive competition and the slowing economy.
A key point in the government's case was Qwest's practice of relying on revenue from one-time sales of capacity on its fiber optic network.
Mohebbi was expected to testify about concerns he raised with Nacchio in December 2000 and early 2001 about revenue goals. In a Jan. 2, 2001, e-mail to then-Chief Financial Officer Robin Szeliga filed in the case, Mohebbi wrote, "We need the recurring to take off big time by the end of first quarter or we are screwed."
Mohebbi is one of several former Qwest executives testifying in the case either with a grant of immunity from prosecution or a plea agreement.
Nacchio acknowledges the stock sales but argues that they were legal because he believed the company would meet the revenue targets.
He has said he -- and he alone among top Qwest executives -- knew of secret contracts from clandestine government agencies that potentially could be worth millions of dollars to Qwest, but that information was excluded from revenue projections.
Each of the 42 insider trading counts against Nacchio carries a penalty of up to 10 years in prison and a $1 million fine.
Federal regulators say 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 improperly report approximately $3 billion in revenue, which helped pave the way for its 2000 acquisition of former Baby Bell U S West Inc., regulators have alleged. Qwest later restated about $2.2 billion in revenue.
(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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