Qwest CEO found guilty of insider trading
- 20 April, 2007 13:10
Joseph Nacchio, the former CEO of Qwest Communications International, was found guilty of 19 counts of insider trading Thursday, covering US$52 million in stock sales.
Nacchio had been charged with 42 counts of insider trading in total, relating to stock sales of more than US$100 million made between January and May 2001. The jury found Nacchio not guilty on the other 23 counts of insider trading.
A jury found him guilty Thursday in federal court in Colorado, following six days of deliberations. Nacchio faces as much as US$1 million in fines and 10 years in prison per count in sentencing, as well as a forfeiture of assets to be determined by the judge, the U.S. Department of Justice said in a statement.
"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, " Deputy Attorney General Paul McNulty said in the statement.
Nacchio's attorney, John Richilano, said the guilty verdicts will be appealed and that his client will remain free on bond, pending appeals.
Nacchio, who was CEO from 1997 to 2002, resigned from Qwest after stockholders raised questions about his US$27 million annual compensation package. In March 2005, the U.S. Securities and Exchange Commission (SEC) charged him, along with eight other former Qwest executives, with fraud.
The SEC maintained that Nacchio and other Qwest executives fraudulently represented certain one-time sales of network capacity as recurring revenue in an effort to inflate the company's stock price. According to the SEC, the executives wanted to keep the stock inflated in order to obtain maximum returns on the company's pending US$44 billion stock-based acquisition of US West, completed in 2000.
Nacchio was unloading his stock while at the same time predicting "extremely aggressive" growth for the company, according to the federal indictment.
He joins a growing list of corporate executives who have been sentenced to or are facing jail time for their actions prior to the stock market meltdown six years ago. The government has also secured convictions against former WorldCom CEO Bernie Ebbers, Dennis Kozlowski of Tyco International, and -- most famously -- Enron's Jeffrey Skilling and Ken Lay.