Ex-Qwest CEO may face charges next week-sources
By Robert Boczkiewicz and Keith Coffman
Prosecutors are seeking a grand jury indictment next week of Qwest
Communications International Inc. former Chief Executive Joseph
Nacchio for personally profiting from the company's overstated
revenue, two people close to the matter said this week.
Nacchio, who left the company in 2002, has been a focus of an ongoing
federal investigation by a grand jury that will reconvene next week
for the last time this year, the sources said.
Prosecutors are likely to ask grand jurors to hand up an indictment
then, said one source close to the investigation.
It was unclear what precise form any charges would take, but a
separate source familiar with the investigation said this week that
prosecutors aim to indict Nacchio for his alleged role in propping up
the telephone company's worth and then selling his shares of its stock
at what later proved to be an inflated value.
The U.S. Attorney's office in Denver had no comment on Thursday.
A judge has given prosecutors until December 31 before legal
proceedings can resume in civil lawsuits that remain open against
Nacchio and other ex-Qwest executives.
This summer, federal prosecutors were granted a suspension of U.S.
Securities and Exchange Commission and Qwest shareholder lawsuits to
give them more time to complete their criminal probe.
In court filings, U.S. Attorney William Leone had said the stay was
required because the SEC case was "directly related to the facts
underlying an ongoing criminal investigation."
The fourth-largest regional telephone carrier in the U.S., Denver-
based Qwest and its former executives have faced both civil and
criminal legal action since the company in 2002 had to restate $2
billion in revenue for 2000 and 2001.
Nacchio has denied any wrongdoing and recently added to his team of
high-profile defense attorneys. Among them is former Iran-Contra
special prosecutor and federal judge Herbert Stern.
Neither Stern nor Charles Stillman, a New York lawyer who also represents
Nacchio, were available for comment on Thursday afternoon.
Six former Qwest executives have been charged criminally in the
alleged securities fraud investigation. Robin Szeliga, the company's
former chief financial officer, is the highest level executive charged
In July, she pleaded guilty to one count of insider trading and agreed
to cooperate with authorities in the investigation, a plea agreement
filed in U.S. District Court showed.
In her plea agreement, Szeliga said that Qwest's senior managers were
aware that the company was boosting revenue figures through deals
unknown to investors. Prosecutors noted in a September court filing
that Szeliga "has provided significant information related to the
subject of a continuing investigation."
Earlier this month, the second source familiar with the investigation
said that two former top-level Qwest executives, chief legal officer
Drake Tempest and president Afshin Mohebbi, testified before the grand
jury against Nacchio. Mohebbi has been given immunity in exchange for
In January billionaire financier Philip Anschutz, who founded Qwest,
and former U.S. Sen. Hank Brown, a former Qwest board member,
testified before the grand jury that convenes again next week, a court
filing this week showed.
More than a dozen lawsuits have been filed against Qwest and former
executives by shareholders, including several large pension funds. The
shareholders claim they lost millions when Qwest stock plummeted from
a high of over $64 per share in 2000 to a low below $2 per share in
Last month, the company reached a $400 million settlement with some
shareholders, but lawsuits against Nacchio remain open.
Last fall, Qwest agreed to pay $250 million to settle a fraud case
brought by the U.S. Securities and Exchange Commission. In March, the
SEC sued 11 former Qwest executives, including Nacchio, accusing them
of fraudulently reporting $3 billion in revenues while omitting $231
million in expenses from the company's books.
The SEC alleges that Nacchio reaped $216 million in "salary, bonuses,
stock sales and other compensation" based on the inflated numbers.
Copyright 2005 Reuters Limited.
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[TELECOM Digest Editor's Note: And obviously this will be another very
merry Christmas for Mr. Nacchio as well. PAT]