Joe Nacchio, a former AT&T executive tapped to transform Qwest Communications into a major telecommunications competitor, was convicted Thursday of 19 of 42 insider trading charges after one-time top executives described his relentless drive to meet revenue projections without revealing financial risks.
A U.S. District Court jury deliberated six days before concluding on 19 counts that the former Qwest chief executive illegally sold stock when he knew the company faced financial challenges and relied heavily on one-time sales to meet revenue targets.
Judge Joe Nottingham set a July 19 sentencing date for Nacchio, who is free on $2 million bail. Each count carries a penalty of up to 10 years in prison and a $1 million fine.
Nacchio's wife and son broke into sobs as the verdict was read.
With the decision, the eight men and four women on the jury turned away Nacchio's claim that he believed in the company's future despite concerns voiced by business managers.
Nacchio, 57, was accused of selling 2.5 million shares of stock for a total of $101 million in the first five months of 2001 based on inside information that Qwest faced financial risks.
The criminal case stemmed from a years-long government investigation into an accounting scandal at Qwest Communications International Inc., a Denver-based primary telephone service provider in 14 mostly Western states.
Federal regulators have said Qwest falsely reported fiber-optic capacity sales as recurring instead of one-time revenue between April 1999 and March 2002. The practice allowed Qwest to improperly report about $3 billion in revenue, which helped pave the way for its acquisition of former Baby Bell US West, regulators have alleged. Qwest later restated about $2.2 billion in revenue.
A civil fraud lawsuit is still pending against Nacchio, former President Afshin Mohbebbi and other one-time executives, alleging they orchestrated a financial fraud that led to the scandal. The Securities and Exchange Commission is seeking repayment and civil penalties, with the amounts to be determined at trial.