Optical/IP Networks

SEC Could Shelve Nacchio Case

Federal Magistrate Judge Craig Shaffer has recommended to the Securities and Exchange Commission (SEC) that it drop the civil fraud charges against five former Qwest Communications International Inc. (NYSE: Q) executives including former CEO Joseph Nacchio.

The recommendation comes because the case involves government state secrets -- evidence that's not admissible in a civil court because it would jeopardize national security.

The SEC has agreed to Judge Shaffer's recommendations and now has 30 days to review the case. It could decide to dismiss the case altogether or narrow the charges to Qwest's transactions with private companies.

The information in question involves Qwest's alleged use of capacity swaps to fraudulently boost revenues. The SEC says two thirds of the capacity Qwest purchased in these swaps was not needed. But Nacchio has maintained he had knowledge of lucrative classified government contracts that Qwest was going to land which would have made the excess capacity necessary.

SEC attorney Polly Atkinson said during a federal court hearing yesterday that the majority of the charges against Nacchio and the other former executives were not based on prospective government contracts, but rather on historical data, making the national security defense a moot point.

Meanwhile, news reports yesterday quoted Nacchio's defense lawyers saying that "an overwhelming bulk, if not all" of the case involves these secret government contracts. During Nacchio's criminal trial for the same charges however, the secret government contracts were not brought up during his defense.

Qwest's executives have been charged with more than $3 billion of fraud between 1999 and 2002. Nacchio has already been convicted in criminal court of 19 counts of insider trading. He was sentenced to six years in prison and was slapped with a $19 million fine. (See Former Qwest Boss Gets Six for Insider Trading.) His case is in appeal.

— Raymond McConville, Reporter, Light Reading

DCITDave 12/5/2012 | 3:48:36 PM
re: SEC Could Shelve Nacchio Case so long as you lie, cheat, and steal while working on gummint bidness, everything will be okay.

way to go, joe.
optical Mike 12/5/2012 | 3:48:35 PM
re: SEC Could Shelve Nacchio Case Let's send him down to Guantanamo Bay
paolo.franzoi 12/5/2012 | 3:48:34 PM
re: SEC Could Shelve Nacchio Case
The terrorists would be horrified by his presence.

jsfrey 12/5/2012 | 3:48:33 PM
re: SEC Could Shelve Nacchio Case Not only this, but look at most all fraud involving SEC charges. The culprit usually gets off with a fine of $.05 on the dollar. I've looked at one case recently where the found guilty party (3rd Offense) defrauded investors out of $22M. He maintains his estate, etc. with no jail time(after 3rd offense) with a disposition recommended by the SEC's recievorship of a $1.5M settlement. So, the crime nets him $20.5M. Where's it all going to end?

We the people will pay - one way or the other.
Raymond McConville 12/5/2012 | 3:48:31 PM
re: SEC Could Shelve Nacchio Case as long as we're cracking jokes, you guys should check out the Chappelle Show skit where they simulate what it would be like if corporate crooks like Nacchio were prosecuted in the same way that crack dealers were and vice versa. it's pure gold.
Sign In