WASHINGTON – A federal jury has found Joseph P. Nacchio, the former chief executive officer of Qwest Communications International Inc., guilty of insider trading charges, the Justice Department announced today.
The jury found Nacchio, 57, guilty of 19 counts of insider trading, covering $52 million in stock sales, that were charged in a December 2005 indictment. The jury returned its verdict today following 15 days of trial before U.S. District Judge Edward Nottingham, and six days of deliberation. The jury returned not guilty verdicts on the remaining 23 counts.
Nacchio faces up to 10 years in prison and a $1,000,000 fine per count at sentencing, which Judge Nottingham has scheduled for July 27, 2007. Nacchio was released on bond pending his sentencing. He also faces asset forfeiture, the amount of which will be determined by Judge Nottingham at a separate hearing after the trial.
“The conviction of Joseph Nacchio is the latest success in our crackdown on corporate fraud and our effort to restore integrity to America’s financial markets,” said Deputy Attorney General Paul J. McNulty, chairman of the President’s Corporate Fraud Task Force. “When the CEO of a major U.S. corporation abuses his position and illegally uses inside information to make millions of dollars, the American people have a right to expect accountability. Justice has been served in this case.”
“As chief executive officer with access to secret company information, Joseph P. Nacchio was an insider who knew, unlike the investing public, that Qwest was in dire financial straits. Nacchio abused his position of trust and illegally used this inside information to sell off more than $100 million worth of Qwest stock – something no other Qwest shareholder could do,” said Assistant Attorney General Alice S. Fisher of the Criminal Division. “Thanks to the hard work of prosecutors from the Fraud Section and the U.S. Attorney’s Office in Denver and investigators from the FBI and the Postal Inspection Service, this once-trusted CEO is now being held accountable for his illegal conduct.”
“Justice is served. Joseph Nacchio is a convicted felon. No one is above the law,” said U.S. Attorney Troy A. Eid of the District of Colorado. “Thanks to Cliff Stricklin, Colleen Conry, James Hearty, Leo Wise and Kevin Traskos, FBI Special Agents Susan Montoya and Miles Gooderham, and Postal Inspector JoJan Henderson for their leadership, along with Alice Fisher.”
“Once again, we have seen the best plans of a corporate bandit foiled by the dedication of investigators, prosecutors, and knowledgeable American juries,” said FBI Assistant Director Chip Burrus for the Criminal Investigative Division. “Whether it is New York City, Houston or Denver, Americans are sending the message loud and clear—corporate fraud will simply not be tolerated. The FBI is proud to be a part of protecting and defending our markets from the misdeeds of crooks who steal and lie to enrich themselves.”
Nacchio served as Qwest’s chief executive officer and was a member of the company’s board of directors from about January 1997 through June 2002. According to the indictment, Nacchio sold Qwest stock from January to September 2001 when he knew, but did not disclose publicly, that Qwest was unlikely to continue to meet its publicly announced earnings targets as that year progressed. Federal law prohibits corporate insiders, such as officers or directors, from trading on material information regarding the company’s stock that has not been publicly disclosed. In particular, the indictment states that Nacchio knew that Qwest’s 2001 financial targets were overly aggressive, that Qwest did not have a good track record in growing recurring revenue, that the company’s business units were underperforming, and that there would be insufficient non-recurring revenue sources to close the gap between Qwest’s publicly stated financial targets and its actual performance. It further states that Nacchio was specifically warned about this information.
The Nacchio investigation was conducted by the FBI and the U.S. Postal Inspection Service. The case was prosecuted by First Assistant U.S. Attorney Cliff Stricklin and Assistant U.S. Attorneys James Hearty and Kevin Traskos of the District of Colorado, and Senior Litigation Counsel Colleen Conry and Trial Attorney Leo Wise from the Criminal Division’s Fraud Section at the U.S. Department of Justice in Washington, D.C.