DENVER – A federal judge ordered former Qwest Communications chief executive Joe Nacchio, convicted of insider trading, to forfeit $52 million in assets he gained in illegal stock sales.
The order on Friday came at the start of a sentencing hearing for Nacchio, convicted in April of making $52 million in stock sales at a time when he knew Qwest faced financial risk but didn't tell investors.
U.S. District Judge Edward Nottingham could sentence Nacchio to a maximum of seven years, three months in prison and impose a $19 million fine. Nottingham also was to decide whether to allow Nacchio to remain free on bond pending an appeal.
Nottingham started off by denying a pending defense motion for an acquittal and for a new trial, dismissing claims that jurors were swayed by damaging pretrial publicity.
"This was an extraordinary jury," he said. "In this court's view, the verdict takes a rational view of the evidence."
Qwest provides telephone services in 14 states in the West and Midwest, including Nebraska.
Nacchio is among the latest in a string of former top-level executives to be convicted in corporate fraud scandals targeted by a government task force established in 2002.
Thousands of investors lost money when Qwest Communications International Inc.'s stock price plummeted from more than $60 a share in 2000 to just $2 a share in 2002. The scandal forced Qwest to restate $2.2 billion in revenue.
The investors could take solace in a Securities and Exchange Commission request for court permission to begin distributing $267 million to investors who purchased Qwest stock between July 27, 1999, and July 28, 2002.
The money was collected in settlements of six lawsuits filed as a result of the agency's investigation into Qwest's accounting practices. The SEC hoped to begin distributing checks on Tuesday to investors who submitted valid claims.
Under federal guidelines, Nacchio faced a prison term ranging from five years, 10 months to seven years, three months, but Nottingham could depart from that if he found factors that are either mitigating, which could mean a lighter sentence, or aggravating, which would make it longer.
Nacchio was indicted in December 2005, nearly three years after then-Attorney General John Ashcroft announced the first indictments in the Qwest investigation, calling it an example of the government's intolerance of white-collar crime.
The case grew out of the accounting scandal in which federal regulators said Qwest falsely reported fiber-optic capacity sales as recurring instead of one-time revenue between April 1999 and March 2002. They said the practices allowed the company to improperly report about $3 billion in revenue and helped it acquire former Baby Bell, U S West Inc.
Prosecutors adopted a narrow focus on insider trading against Nacchio, indicting him for 42 stock sales completed in the first five months of 2001 -- a time when business unit managers warned that Qwest faced financial risk because it was increasingly relying on money from one-time sales to meet revenue targets.
A jury deliberated six days before acquitting Nacchio on 23 counts and convicting him on 19 for transactions that occurred in April and May 2001 -- after Qwest released its 2001 first-quarter results but didn't tell investors about the revenue situation.
Nacchio's legal issues are far from over. A civil fraud case is pending against him and four other one-time Qwest executives alleging they orchestrated financial fraud that led to the scandal. A trial isn't expected to be set until 2009.
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