Prosecutors call former Qwest chief a cheater as trial opens
AP Business Writer
Glenwood Springs, CO Colorado
DENVER (AP) ” Former Qwest Communications chief Joe Nacchio deceived investors and the public when he secretly sold $101 million in Qwest stock before its share price plummeted, a federal prosecutor declared as opening statements began Tuesday in Nacchio’s insider trading trial.
“This is a case about cheating,” Assistant U.S. Attorney James Hearty told jurors. “He sold $100 million worth of Qwest stock when he knew about problems at Qwest ” problems that people outside Qwest did not know.”
Defense attorneys were to make their opening statement later. They say Nacchio was optimistic about the company’s future because he expected Qwest to win lucrative contracts from clandestine government agencies.
Nacchio’s case, Hearty said, “is based on a very simple principle ” fairness. Corporate insiders are in a position to take advantage of information people outside don’t know.”
Nacchio, 57, is accused of improperly selling the stock in the first five months of 2001 while privy to nonpublic information that Qwest Communications International Inc. was at financial risk. The company, which provides phone service to 14 mostly Western states, soon after became mired in an accounting scandal and eventually restated $2.2 billion in revenue.
Nacchio is charged with 42 counts of insider trading. Each count carries a penalty of up to 10 years in prison and a $1 million fine.
Hearty claimed that in late 2000 Nacchio became aware of problems Qwest would be facing in 2001, and that Qwest stood to fall far short of financial targets it had set publicly.
Still, Hearty claimed, Nacchio repeatedly “told investors that everything at Qwest was great.”
“Mr. Nacchio sold many more shares of Qwest stock during this time period than he had ever sold before. In the first five months of 2001, Mr. Nacchio sold 250,000 more shares than he had in the previous 18 months combined,” Hearty said.
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.
Hearty began his statement shortly after a jury was seated in the high-profile case ” a pool of 18 jurors, including six alternates. The panel of eleven men and seven women was chosen after 10 1/2 hours of questioning.
Nacchio, looking fit and upbeat, took an active role in the jury selection process, consulting repeatedly with his attorneys as they made their decisions.
Nacchio also is a defendant in an SEC civil fraud case stemming from the scandal.
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