- The Washington Times - Thursday, April 19, 2007

DENVER (AP) — Joe Nacchio, a former AT&T; executive tapped to transform Qwest Communications into a major telecommunications competitor, was convicted yesterday of 19 of 42 insider trading charges after one-time top executives described his relentless drive to meet revenue projections without revealing financial risks.

A U.S. District Court jury deliberated six days before concluding on 19 counts that the former Qwest chief executive illegally sold stock when he knew the company faced financial challenges and relied heavily on one-time sales to meet revenue targets.

Judge Joe Nottingham set a July 19 sentencing date for Nacchio, who is free on $2 million bail. Each count carries a penalty of up to 10 years in prison and a $1 million fine.

Nacchio’s wife and son broke into sobs as the verdict was read.

With the decision, the eight men and four women on the jury turned away Nacchio’s claim that he believed in the company’s future despite concerns voiced by business managers.

The conviction of Nacchio, 57, caps a U.S. crackdown on corporate fraud that began when Enron collapsed in 2001. Hundreds of executives have been convicted, including three former CEOs, Enron’s Jeffrey Skilling, Bernard Ebbers of WorldCom and John Rigas, founder of Adelphia Communications.

Nacchio was accused of selling 2.5 million shares of stock for $101 million in the first five months of 2001 based on inside information that Qwest faced financial risks.

The criminal case stemmed from a yearslong government investigation into an accounting scandal at Qwest Communications International Inc., a Denver primary telephone service provider in 14 mostly Western states.

Federal regulators said 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 about $3 billion in revenue, which helped pave the way for its acquisition of former Baby Bell US West Inc., regulators have said. Qwest later restated about $2.2 billion in revenue.

Nacchio, who was CEO from 1997 to 2002, didn’t testify in his own defense at the four-week trial.

Defense lawyers said he acted in good faith and believed Qwest would meet the projections after buying US West in 2000. Nacchio sold stock to diversify his portfolio, exercising options due to expire, his lawyers said.

A civil fraud lawsuit is still pending against Nacchio, former President Afshin Mohbebbi and other one-time executives, charging they orchestrated a financial fraud that led to the scandal. The Securities and Exchange Commission is seeking repayment and civil penalties, with the amounts to be determined at trial.

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