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JOE VS. THE JUDGE

Three months after conviction, former Qwest CEO learns his fate today

Sara Burnett, Rocky Mountain News

Published July 27, 2007 at midnight

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Joe Nacchio once stood on top of the telecommunications world, an aggressive businessman with a flashy style who made millions leading one of Colorado's largest companies.

Today, the former Qwest CEO will return to a Denver courtroom, a convicted felon facing more than seven years in prison following one of the largest insider-trading verdicts in U.S. history.

Deciding Nacchio's fate will be U.S. District Judge Edward Nottingham, a 17-year veteran of the federal bench known for taking a hard line with those who come before him.

The hearing, scheduled to begin at 9 a.m. at the Alfred A. Arraj federal courthouse, follows one of the most talked-about trials in Denver in decades.

A jury in April found Nacchio guilty of 19 counts of insider trading for selling stock in April and May 2001. The jury acquitted him on 23 other charges for sales made earlier in the same year.

Nacchio's attorneys have said they plan to appeal.

Jurors said the former CEO had plenty of warning by April 2001 that Qwest was relying too heavily on one-time sales of space on its fiber-optic network and that the company was unlikely to hit its revenue goals. That information should have been disclosed to shareholders before Nacchio sold his stock, the jury found.

Nacchio grossed $52 million on the illegal sales.

Now the government wants that money back.

Prosecutors are asking Nottingham to order Nacchio to forfeit the $52 million. The money then would be distributed to "victims," or shareholders who lost money on Qwest stock around that same time, though the specifics of how the money would be dispersed are still unclear.

Prosecutors also want a $19 million fine - the maximum fine of $1 million for each count on which the jury returned a guilty verdict. And they're asking for the maximum prison sentence that federal guidelines will allow - seven years, three months.

"Any lesser sentence would send a message of tolerance of the egregious behavior proven at trial," Assistant U.S. Attorney James Hearty wrote in the government's sentencing brief.

Nacchio's attorneys are asking for a lesser prison sentence, though they have not stated publicly what term they're seeking. They've asked Nottingham to consider two issues when deciding his fate: the health of two immediate family members and Nacchio's charitable works.

The defense has not said which family members would be affected if Nacchio goes to prison, but they are believed to be his oldest son, who has attempted suicide, and Nacchio's elderly mother.

Nacchio's lawyers also say his fine should be a maximum of $6 million, and he should be ordered to forfeit no more than $1.8 million - the amount a defense- hired expert has determined was the financial gain Nacchio enjoyed because of the nonpublic, or "insider," information.

A group of local attorneys polled by the Rocky Mountain News predicted Nottingham will sentence Nacchio to five to six years in prison. They disagreed on the fine and forfeiture, though most said it's unlikely Nottingham will agree with the defense's $1.8 million argument.

Just how much Nacchio gained from the sales could be key to what prison sentence Nottingham hands down. If the judge decides Nacchio made the full $52 million, the range of potential prison sentences is greater than if he believes the gain is $1.8 million.

In the courtroom

Former Qwest CEO Joe Nacchio was found guilty this spring of 19 counts of insider trading in connection with selling $52 million of stock in April and May 2001.

• U.S. District Judge Edward Nottingham will decide the sentence, fines and amount of stock gains to be forfeited today. If Nacchio is given prison time as expected, Nottingham will decide whether Nacchio should remain free pending appeal or how soon he should report to prison. Judges sometimes give a defendant 30 to 45 days to report. The amount of forfeiture drives the recommended sentence, but Nottingham can deviate from the recommended range.

Some scenarios

• Forfeiture of the full $52 million of gross proceeds, or $44.6 million after subtracting Nacchio's stock option costs. Recommended sentence of 70 to 87 months.

• Forfeiture of $28.6 million, subtracting stock option costs and taxes. Recommended sentence of 63 to 78 months.

• Forfeiture of $1.8 million as argued by the defense. Recommended sentence of 30 to 41 months. The defense is arguing for further leniency, based on factors such as the mental health of Nacchio's son, David.

Sentencing open to public

• Start time: 9 a.m. today

• Location: The federal courthouse at 19th and Champa streets in downtown Denver.

• Public seating: First-come, first-served in the main courtroom on the second floor, A201. An overflow room with video and audio will be set up on the 10th floor, A1001.

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