Risk Management

When CFO Talks, Will CEO Walk?

The former finance chief at Qwest was wrongly left off an expert witness list in his ex-boss's insider-trading trial, an appeals court rules. Next ...
Stephen TaubMarch 18, 2008

The former CFO of Qwest played a key role in a federal appeals Court’s decision on Monday to grant a new trial for Joe Nacchio, the company’s one-time chief executive.

The Tenth Circuit Court of Appeals ruled that the trial judge wrongly excluded expert testimony important to Nacchio’s defense in his insider trading case, the Associated Press reported. One of those experts was the ex-CFO, Robin Szeliga.

Nacchio was convicted last April on 19 counts of insider trading for selling $52 million worth of Qwest shares in April and May 2001 after receiving private warnings that the company would miss revenue targets. He was found not guilty on 23 counts related to earlier trades totaling $49 million.

Nacchio was sentenced last summer to six years in prison and ordered to forfeit $52 million in assets he gained from the illegal stock sales. In addition, U.S. District Judge Edward Nottingham imposed a maximum $19 million fine and ordered him to serve two years of probation after serving his sentence. Nacchio had faced a maximum of seven years, three months in prison.

Prosecutors had asserted Nacchio was “specifically and repeatedly warned” about the financial risks facing his company just five months before the stock trades. The indictment also charged that the executive was well aware of Qwest’s “extremely aggressive” financial targets, and that he knew there wouldn’t be enough revenue from other sources to “close the gap” between Qwest’s publicly stated goals and its actual performance.

On Monday Denver’s Channel 7 quoted U.S. Attorney Troy Eid, who prosecuted Nacchio, as saying, “This is a setback, not a defeat. The good news is the circuit court said our trial team presented sufficient evidence to convict Mr. Nacchio of insider trading. A divided court ruled that a lone expert witness for the defendant was improperly excluded. We’re considering all our legal options in consultation with the Department of Justice.”

Those options include preparing for a new trial, asking the appeals court to review the case with all of its judges, or settling the case.