SANDY SHORE AP Business Writer DENVER
Prosecutors recommended Friday that former Qwest chief executive Joe Nacchio be sent to prison for a maximum of seven years and three months for completing $52 million in illegal stock sales when his telecommunications company was at financial risk. In a 40-page brief filed late Friday, government attorneys also recommended Nacchio serve three years on probation and be fined a maximum of $19 million. “Any less severe sentence would fail to provide just punishment, to promote respect for the law, and to protect the public,” p r o s e c u t o r James Hearty wrote on behalf of the legal team. In a separate brief, defense attorney Herbert Stern asked U.S. District Judge Edward Nottingham to impose an unspecified lesser sentence which he said was warranted because of the effect a lengthy prison term would have on the health of two of Nacchio’s family members. Stern said the situation was explained in detail in a sealed report from the U.S. Department of Probation that was submitted to the judge. Nacchio also could be required to forfeit millions under a civil forfeiture action filed after he was convicted. Prosecutors want Nottingham to require the onetime CEO give back $52 million of “ill-gotten gains” while defense attorneys argue it should be no more than $1.8 million. Nacchio, who resigned from Qwest Communications International Inc. under pressure in June 2002, is scheduled to be sentenced July 27 in U.S. District Court. He was charged with 42 counts of insider trading for $101 million worth of transactions between January and May 2001. The jury acquitted him on 23 counts but concluded his criminal action began after an April 2001 conference call when he failed to inform investors of the problems the company faced and convicted him on 19 counts for transactions during April and May of 2001. Nacchio remains free on bail pending the sentencing, and has said he will appeal the conviction. Each insider trading count carries a penalty of up to 10 years in prison and a maximum $1 million fine but is adjusted under federal sentencing guidelines that take into account Nacchio’s actions which either made the situation worse or better. Prosecutors determined the range of sentence under the guidelines should be 70 months to 87 months but asked for the term to be at the higher end for a number of reasons, including the fact that Nacchio abused his position as CEO by withholding crucial i n f o r m a t i o n from investors. “No one knew better than the defendant how important the information was that he refused to share with investors,” they wrote. “The defendant alone created the environment that enabled him to exploit the fact (that) he knew in April and May of 2001 that Qwest likely was not going to hit its targest for the third and fourth quarters of 2001.” Calling Nacchio’s conviction “one of the largest insider trading verdicts in history,” they said a stiff sentence is required to deter others from taking similar action. “Any lesser sentence would send a message of tolerance of the egregious behavior proven at trial,” the brief stated. Separately, Nacchio and several other one-time Qwest executives are still involved in a pending civil fraud lawsuit that accuses them of orchestrating a financial fraud that forced Qwest to restate $2.2 billion in revenue.