Feds kept it simple to convict Qwest's Nacchio

DENVER — Shorter — and simpler — seems to be better for the government when it comes to winning convictions in white-collar-crime cases.

Thursday's conviction of former Qwest CEO Joseph Nacchio on insider-trading charges was the latest example of federal prosecutors successfully using a less-complicated strategy: Executives lied to investors and profited from it.

It's likely that investors will see the government pursue more insider-trading cases proven through evidence than accounting cases that focus on the judgment of executives, said Peter Henning, a Wayne State University professor specializing in white-collar crime.

"Insider-trading charges are a way to bring what is in effect an accounting case without getting into the accounting minutiae," he said. "You're going to see them stay away from judgment calls."

Nacchio is the latest corporate executive to be prosecuted in accounting and fraud scandals starting in the late 1990s and sparking investor outrage.

The case is an example of how the government is narrowing its focus, said attorney Michael Levy, a Washington, D.C.-based former federal prosecutor who specializes in white-collar crime.

An early federal prosecution, involving the head of Tyco International, was a wide-ranging, complex conspiracy case that left jurors confused, Levy said.

From Tyco to cases involving leaders of WorldCom, Enron and now Qwest, Levy said the government has simplified its theories. Nacchio, for example, was charged with insider trading — but not in the accounting scandal that nearly brought down Qwest.

"The government clearly has developed an approach to these cases that's gotten progressively more efficient and targeted," Levy said. "They've clearly compressed their theory so it's much more easily digestible."

In a three-week trial, prosecutors hammered the concept that Nacchio lied to investors while selling stock as Qwest battled aggressive competition in a weakening economy. In her closing argument, prosecutor Colleen Conry quipped: "If you don't tell, you can't sell."

Defense attorneys insisted Nacchio was optimistic about Qwest's prospects and set higher internal financial projections to push executives into performing better. They said Nacchio wanted to resign in January 2001 because of a family crisis, an indication he wasn't acting on inside information.

A jury deliberated six days before acquitting him on 23 counts and convicting him on 19 for transactions that occurred in April and May — after Qwest released its 2001 first-quarter results.

Nacchio, who did not testify, will appeal. His attorneys did not return a call seeking comment Friday.

The case grew out of a multibillion-dollar scandal that forced Qwest to restate $2.2 billion of revenue. Federal regulators have said Qwest falsely reported fiber-optic capacity sales as recurring instead of one-time revenue between April 1999 and March 2002, a practice that allowed it to improperly report about $3 billion in revenue.

Nacchio is to be sentenced July 27 by U.S. District Judge Edward Nottingham. Each count carries a sentence of up to 10 years in prison and a $1 million fine, but Nacchio likely will receive less prison time under federal sentencing guidelines, said Henning, who has closely monitored the Nacchio case.

He speculated Nacchio will receive a prison sentence of eight years to 10 years and a fine of $500,000 to $1 million.