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Former Qwest Boss Gets Six for Insider Trading

Raymond McConville
News Analysis
Raymond McConville
7/27/2007

Joe Nacchio, the former CEO of Qwest Communications International Inc. (NYSE: Q), was sentenced to six years in prison and ordered to surrender $52 million in funds that he earned through insider trading. He must also pay a $19 million fine.

Back in April, Nacchio was found guilty of 19 of 42 counts of insider trading. Each of the counts carried a $1 million fine and a potential 10 years in prison. (See Nacchio Found Guilty.) Nacchio is also facing an impending civil suit from the Securities and Exchange Commission (SEC) that is expected to go to trial in 2009.

From 2000 to 2002, Qwest's stock fell from $60 to $2 when it was revealed that the carrier Nacchio controlled overstated earnings to investors and did not reveal that the company faced significant financial risk. Nacchio had sold about $100 million in stock based on this inside information, authorities say. (See Nacchio Qwoted Qwestionable Qwest Targets.)

Once Qwest's shady financial practices were revealed, the company had to restate revenue and earnings from 2000 though 2002 which ended up trimming about $2.5 billion from the balance sheet.

"The defendant cannot but have condoned a culture in which this could have occurred," said U.S. District Judge Edward Nottingham in sentencing Nacchio today.

The scandal left Qwest crippled with $26 billion in debt. All things considered, the company has rebounded nicely under the direction of CEO Dick Notebaert who slashed the budget left and right all the while cutting Qwest's debt in half and making the company profitable again.

But while on paper Qwest may be profitable again, the effects of Nacchio's actions are still affecting the company today. In being forced to cut costs, Qwest has been significantly limited from spending capital on building a 21st century network access network.

While net income has been on the rise, revenues have been slipping as the company has no modern services to offset the loss of legacy fixed line subscribers to services such as cable and wireless.

— Raymond McConville, Reporter, Light Reading

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Raymond McConville
Raymond McConville
12/5/2012 | 3:04:52 PM
re: Former Qwest Boss Gets Six for Insider Trading
It seems like Nacchio might have gotten off a bit easy at least when you compare him to some other convicted telecom felons, particularly Bernard Ebbers who's doing 25 years. Let us know what you think here:

http://www.lightreading.com/su...
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