Anschutz to Testify in Nacchio’s Defense

By SANDY SHORE

DENVER – Billionaire Philip Anschutz, who hired Joe Nacchio to turn Qwest Communications into a major telecommunications company, has been chosen to kick off the defense’s case in Nacchio’s insider trading trial.

Anschutz, scheduled to be Nacchio’s first witness on Thursday when the trial resumes, was expected to testify about the former CEO’s employment contract, which included shares representing 3 percent of the company’s growth, or about $27 million, by December 2001.

The so-called growth shares are included in the government’s allegations that Nacchio illegally sold $101 million worth of stock during the first five months of 2001 based on inside knowledge that Qwest would be unable to meet revenue targets.

Prosecutors rested their case Wednesday after calling 20 witnesses over the course of 10 days who testified they were worried that Qwest faced financial risk because of its heavy reliance on one-time sales to meet revenue projections.

Many said they told Nacchio in late 2000 that they believed financial targets were unrealistic given ramped-up competition, a weakening market and slowing economy.

After Qwest acquired former Baby Bell U S West Inc. in 2000, they described a tension-filled atmosphere under Nacchio’s reign, with him putting priorities on meeting the revenue goals and maintaining a high stock price.

Qwest’s reliance on one-time sales to meet revenue targets is a critical component of the government’s overall investigation of Denver-based Qwest Communications International Inc., a primary telephone service provider in 14 mostly Western states.

Prosecutors have maintained Nacchio kept issuing optimistic advisories to investors and analysts while dumping his stock.

They also have alluded to an allegation that a document outlining Nacchio’s plan to sell some of his stock was backdated in late 2000.

David Weinstein, a financial analyst for Nacchio, testified last week about phone conversations with Nacchio late in 2000 in which they discussed investment strategies for a large number of shares that Nacchio was due to receive in early 2001.

He said Nacchio did not mention signing the sale commitment document during a Nov. 2, 2000, phone call but did tell Weinstein on Dec. 9 that he was signing it. The document submitted in evidence and signed on Nacchio’s behalf by a Qwest attorney was dated Nov. 3, 2000.

A motion is pending to strike some of Weinstein’s testimony as prejudicial or to declare a mistrial as a result of the documents.

The defense says Nacchio legally exercised stock options under terms of his contract but also was optimistic about Qwest’s future because he anticipated lucrative contracts with clandestine government agencies.

In a separate civil lawsuit, federal regulators have said Qwest falsely reported one-time sales as recurring revenue between April 1999 and March 2002, which allowed the company to improperly report approximately $3 billion in revenue to help acquire U S West. Qwest later restated about $2.2 billion in revenue.

In one quarter, for example, one-time sales of capacity on Qwest’s fiber-optic network accounted for 39 percent of revenue growth, prosecutors have said.

Among those named in the lawsuit are Nacchio and other one-time Qwest executives.

Each of the 42 insider trading counts against Nacchio carries a penalty of up to 10 years in prison and a $1 million fine.