Nasty Nacchio Heading for the Can

Nov 13, 2007 - (Tip Report) Denver - Assistant U.S. Attorney Stephan Oestreicher Jr. wrote in an 83-page brief presented to the Court Friday that ex-Qwest CEO Joe Nacchio's conviction on insider-trading charges should be upheld, despite Nachio's claim that U.S. District Judge Edward Nottingham improperly denied him the chance to present evidence about secret business Qwest was undertaking for the government.

"A reasonable jury could conclude that Nacchio dumped his stock on the basis of the dire reports he had just received," Ostreicher wrote.

According to the prosecutor, Nacchio sold millions in stock knowing the company would be facing dire reporting requirements and that he knew all to well that as Qwest's top executive, he was not permitted by law to take advantage of insider information, but he did so knowingly.

The ex-Qwest Chief Executive was convicted of 19 counts of insider trading in April after a jury concluded he sold $52 million worth of stock when Nacchio knew the telecommunications company was at financial risk, but didn't tell investors.

Judge Nottingham had ruled that the classified information about the government involved multiple communications bidders and was unrelated to the insider-trading charges levied against Nacchio at the time of his trial.

Nacchio tried to say Nottingham hadn't permitted him to present his own key witness, when Ostreicher countered that Nacchio's own managers had presented him with information that they were worried about making financial targets, which Nacchio had overlooked in his communcations with shareholders. The Prosecutor argued that these were more than 'mere projections' and Nacchio knew it.

Lomonaco is not the only Marx executive to run afoul of regulators in recent days. On September 5, 2003, the SEC charged that Steven Wise (who at the time was Marx's CEO and sole director) and Larry Vindman, a New Jersey stock promoter, engaged in fraudulent and manipulative practices to inflate the value of Marx stock. The SEC said that Wise and Vindman gave 100,000 shares of Marx common stock to two stockbrokers in order to induce them to solicit customers who would buy Marx shares at inflated prices.

Ostreicher told the Court Friday that none of Judge Nottingham's rulings had therefore predjudiced Nacchio.

Nacchio remains free on bail pending his appeal of the conviction and six-year prison sentence. His next court appearance is slated for December 18th before the 10th U.S. Circuit Court of Appeals who will then hear oral arguements.