The federal investigation of Qwest Communications International Inc. (NYSE: Q) has reached former CEO Joseph Nacchio, as he was indicted today on 42 counts of insider trading. Each count carries a possible sentence of 10 years and a $1 million fine.

The case stems from Nacchio's sale of $100.1 million worth of stock in 2001. He is accused of selling the stock while possessing information that Qwest's performance was not as rosy as the picture painted in public statements. Prosecutors are seeking $100 million in restitution.

This is the first time Nacchio himself has been criminally indicted, but federal indictments alleging fraud at Qwest have been rolling down since 2003. The government has been investigating whether Qwest improperly booked revenues between 1999 and 2002, as the dotcom bubble had burst and Qwest's fortunes -- like the rest of telecom's -- began to sink. (See Prosecutors' Party at Qwest.)

The prosecution is expected to bring former Qwest executives to the witness stand. Possibilities include former CFO Robin Szeliga, who has pleaded guilty to one count of insider trading, and former president Afshin Mohebbi, who was likewise under investigation.

A Securities and Exchange Commission (SEC) investigation into possible fraud at Qwest was settled in 2004. (See Qwest Pays $250M to Settle SEC Probe.)

— Craig Matsumoto, Senior Editor, Light Reading