DENVER – Joseph Nacchio, former CEO of Qwest Communications International Inc. (Q), was found guilty on Thursday of 19 counts of insider trading, capping the last major trial in a spate of scandals that tarnished corporate America over the last decade.
Nacchio, 57, was acquitted of 23 of the 42 insider trading charges. Federal prosecutors had accused him of selling $101 million of Qwest shares after company insiders warned him that the phone carrier could not meet its financial forecasts.
The 19 guilty charges corresponded to stock sales worth more than $50 million in April and May of 2001.
"This is an overwhelming determination of guilty," U.S. Attorney Troy Eid told reporters outside Denver's federal courthouse.
Nacchio's 22-year-old son, Michael, sobbed as the not guilty verdicts were read out in the courtroom but turned somber as the guilty charges were delivered.
Nacchio himself remained stoic as the verdict was read and later said he would not make any statements. His attorney, Herbert Stern, said there would be an appeal.
Nacchio's trial was the last in a string of high-profile crackdowns on corporate fraud that led to prosecutions of top executives at companies such as Enron Corp. and WorldCom Inc. Prosecutor Colleen Conry said the Nacchio verdict "sent a message all the way to Wall Street."
Nacchio will remain free on a $2 million unsecured bond and will be sentenced on July 27, U.S. District Court Judge Edward Nottingham said.
The former chief executive faces up to 10 years in prison and a $1 million fine per count at sentencing. He also faces asset forfeiture in an amount to be determined by the judge.
His acquittal on some charges may not help him during sentencing, according to New York-based criminal defense attorney Stephen Ascher, who has represented defendants in insider-trading cases.
"Although the jury acquitted him on a majority of the counts, for sentencing purposes that's unlikely to help the defendant very much."
Qwest, the third-largest U.S. regional phone carrier, became the target of federal prosecutors and regulators in 2002 after it restated $2.2 billion in revenue for the preceding two years while Nacchio was in charge. That investigation led to the insider-trading charges against him.
During the four-week trial, Nacchio's attorneys argued that he was an aggressive manager who was optimistic about Qwest's prospects and had not foreseen the economic downturn that hit the entire telecommunications industry.
They also said Nacchio could not have been planning to commit a crime because he tried to resign from his post in January 2001 following a suicide attempt by his son.
But several former Qwest executives — all of whom had immunity or plea deals with the government — testified that Nacchio set unrealistic earnings projections and withheld from investors that the company was masking its financial woes with one-time transactions that did not reflect sustained growth.
Prosecutors also described Nacchio's later stock sales as a "selling binge" that followed an April conference call in which he stuck by Qwest's lofty revenue goals.
Doug Stoneman said he and other jurors paid close attention to evidence such as an analyst conference call where Nacchio reaffirmed aggressive revenue projections.
"It was no longer plausible to us that that he didn't know that what he was doing was illegal," Stoneman said in a telephone interview.
Regarding the not guilty verdicts, which corresponded to stock sales from January through March of 2001, lead prosecutor Cliff Stricklin said jurors may not have been convinced that Nacchio had access to enough material non-public information at that time for those to be considered insider trades.
Ascher said the jury "may also have been swayed by the fact that the sizes of sales got so much larger, that it showed an increasing desire to cash out ... presumably, the jury thought he massively increased the volume for a reason."
During Nacchio's selling flurry in April and May 2001, Qwest was trading between $38.31 and $41.12 on the New York Stock Exchange, and plummeted to below $2 by June 2002 when he was forced out as CEO.
Qwest itself has reached settlements with the SEC and some pension fund shareholders, but individual suits against Nacchio and others were awaiting completion of the criminal trial.