Nacchio was worth over $500 million in 2000 and he still wanted more!!! I bet he would have retired early if he knew then what he knows now. A 4% SWR would have given him $20 million a year for the rest of his life.
Ex-Qwest Chief Nacchio Gets 6 Years for Inside Trades
By David Voreacos
Joseph Nacchio, former CEO of Qwest
July 27 (Bloomberg) -- Joseph Nacchio, former chief executive officer of Qwest Communications International Inc., was sentenced to six years in prison for trading $52 million in company shares based on inside information about falling revenue.
U.S. District Judge Edward Nottingham ordered Nacchio to forfeit $52 million and pay a fine of $19 million, refusing his request for probation. Prosecutors sought a prison term of more than seven years. The judge denied Nacchio's request for bail while he appeals his April 19 conviction, saying he must surrender within 15 days of his assignment to a prison.
``The crimes of which the defendant has been found guilty are crimes of overarching greed,'' Nottingham said in sentencing Nacchio today in Denver. ``The defendant cannot but have condoned a culture in which this could have occurred.''
He joins a growing list of CEOs sentenced to prison in the wave of U.S. prosecutions that began after Enron Corp. went bankrupt in 2001. Ex-WorldCom Inc. founder Bernard Ebbers, 65, is serving 25 years for securities fraud, and former Enron CEO Jeffrey Skilling is doing 24 years. Conrad Black, the former CEO of Hollinger International Inc., was convicted July 13 of fraud and obstruction and will be sentenced Nov. 30.
Jurors found Nacchio guilty of 19 counts of insider trading for selling $52 million in Qwest shares from April 26 to May 29, 2001, based on private warnings that the company would miss revenue targets. Nacchio, 58, sold shares at the start of an accounting scandal that nearly bankrupted Denver-based Qwest.
`Horatio Alger Story'
``In many ways, Mr. Nacchio is the classic Horatio Alger story, somebody who rose from immigrant parents and rose to enormous heights by sheer will and talent,'' the judge said. ``Mr. Nacchio was what this nation expects from corporate executives -- aggressive, tough, and demanding.''
Nottingham, who said Nacchio must serve two years of supervised release after prison, said he is not above the law.
``If it is perceived that there is one law for the rich and one law for everyone else, the law ultimately falls into disrespect,'' the judge said. ``The law does not care that you are wealthy.''
Nacchio did not speak when the judge invited him to before sentencing, instead trying to talk at the end of the 3 1/2-hour hearing. Both his lawyer and the judge told him not to speak.
``Yes, but I'm the defendant,'' Nacchio said. ``I promise it will be respectful.''
Nottingham then adjourned the hearing. Nacchio did not comment to reporters as he left the courthouse.
`Wonderful Father'
Defense lawyer Herbert Stern sought leniency, citing Nacchio's charitable works and need to care for a 26-year-old son with severe psychological disabilities. Nacchio wiped away tears during comments about his son. The judge said that while Nacchio is a ``wonderful father,'' the son would get adequate medical care and strong support from Nacchio's wife, Anne.
Nottingham also said greed compelled Nacchio to take the Qwest job and spend four days a week away from his home in Mendham, New Jersey, when he could have stayed with his son.
Assistant U.S. Attorney Cliff Stricklin had sought a stronger sentence of seven years and three months, saying it must deter other executives.
``He set the message for that company, and people looked to him for that message,'' Stricklin said. ``Joe Nacchio was Qwest. People looked to him for the truth, and they didn't get it.''
Nacchio, who was CEO from 1997 to 2002, joined Qwest from AT&T Inc.. He built Qwest into the fourth-largest U.S. phone company and presided over a $100 billion drop in market value.
Prison Recommendation
Stern asked that Nottingham recommend to the Bureau of Prisons that Nacchio serve his term at the Schuylkill Federal Correctional Institution in Minersville, Pennsylvania. The judge said he would.
The prison houses other executives convicted of white-collar crimes, including former Cendant Corp. Vice Chairman E. Kirk Shelton and ex-Rite Aid Corp. chief counsel Franklin C. Brown.
Prosecutors said at trial that Nacchio should have disclosed that Qwest's recurring revenue was falling short in 2001 even as the market for one-time sales of its network capacity was shrinking. Nacchio accelerated his stock sales upon learning in April 2001 that Qwest missed its first-quarter forecasts for recurring revenue, the evidence showed.
Nacchio still faces a lawsuit from the U.S. Securities and Exchange Commission that accuses him of directing a $3 billion accounting fraud. He also faces investor lawsuits.
Qwest shares reached a closing high of $64.50 in March 2000 based on projected use of its fiber-optic network. Shares sank to $1.11 in August 2002. Richard Notebaert, Nacchio's successor, averted a collapse by selling the company's phone-book unit and slashing borrowings to $17 billion from $26 billion.
One-Time Sales
Evidence at his trial showed Nacchio refused to disclose Qwest's use of one-time sales of network capacity while overstating the growth of recurring revenue.
Two analysts told jurors they lowered their opinion of Qwest after the company began to disclose in August 2001 the extent of its reliance on one-time sales.
The government contended Nacchio accelerated his stock sales upon learning in April 2001 that Qwest missed its first-quarter forecasts for recurring revenue. Nacchio exercised and sold $34 million in shares from April 26, 2001, to May 1, 2001.
Jurors saw several video clips of Nacchio giving upbeat forecasts. They also heard evidence that his net worth, including stock options, was $547 million in 2000.
The case is U.S. v. Nacchio, 05-cr-545, U.S. District Court, District of Colorado (Denver).
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