April 11, 2007 8:42 AM
Day 15: Closing arguments finished
4:30 p.m.: Court is in recess until Thursday, when the jury will get its instructions before starting deliberations.
4:25 p.m.: “He chose to cheat in order to make a lot of money," lead prosecutor Cliff Stricklin says of Joe Nacchio, in wrapping up the rebuttal closing arguments today.
Stricklin said Nacchio violated the "special relationship of trust" between a company executive and shareholders, by putting his interest first.
Nacchio made his choices, Stricklin said. And "when you've already cashed out 100 million, and you have a net worth of nearly a half a billion dollars, how much a victim can you be?"
"There are plenty of victims out there," Stricklin said, noting that every time Nacchio sold stock there was "somebody on the other side" buying stock with hard-earned money.
"Those investors who didn't know the inside story that Joe Nacchio knew, they invested their dreams, their hopes, maybe early retirement, maybe college for their kids."
4:20 p.m.: Lead prosecutor Cliff Stricklin approached the jury when he brought up the delicate topic of the attempted suicide in January 2001 of Nacchio's son, David.
Stricklin choked up when he said: "And one of the reasons I struggled with this is because I'm a father too, and there's nothing I wouldn't do for my kids. But I wouldn't lie for them, and I wouldn't steal."
Stricklin said Nacchio's situation "obviously" is heartbreaking, but told jurors that they are going to be told by the judge that they can't let sympathy enter in their verdicts.
Nacchio "took some time off, as he should, to be with his family."
But Stricklin said the facts are that Nacchio stayed at Qwest, and received more money, a bigger bonus and eventually a bigger contract. And "he called his broker to sell 13 times between . .. January 26 and February 13."
Nacchio appeared visibly upset by Stricklin's comments about Nacchio's son.
4:10 p.m.: Joe Nacchio would have taken the 5 million options he was offered in February 2001 if he were bullish about the company's stock price, lead prosecutor Cliff Stricklin argued.
"If he thought the stock price was going up, he would have accepted these options as any others," Stricklin said.
Instead, Nacchio took a chance and it paid off big because in October 2001 he got those options and then some, Stricklin said. He got 7.25 million options at $16.81 a share.
Stricklin said that showed what Nacchio knew all along -- that the company's targets were too high.
4 p.m.: Lead prosecutor Cliff Stricklin tries to show Joe Nacchio's intent to defraud in the number of times he reaffirmed Qwest's publicly-stated targets.
Defense attorney Herbert Stern argued Nacchio made his best efforts in forecasting, and that he couldn't possibly have predicted what would happen to the economy a year after targets were raised on Sept. 7, 2000.
But Stricklin showed Nacchio reaffirmed the targets six times between October 2000 and July 2001, despite repeated warnings about the company's business.
Stricklin said Nacchio "painted himself in a corner in 1999" with the 15 to 17 percent growth targets, and then refused to lower them later "because he wanted to beat his old company, AT&T" and make a lot of money.
Nacchio was passed over in 1996 for the top job at AT&T.
3:45 p.m.: Lead prosecutor Cliff Stricklin tries to show Joe Nacchio's deceit in connection to signing a growth stock sale document.
Stricklin took jurors to the time Nacchio signed a document certifying that he didn’t possess insider information before selling his $14 million of growth stock.
Defense attorney Herbert Stern today said Nacchio made the oral instruction to Qwest’s associate counsel Yash Rana on Nov. 3, 2000, but the document wasn’t prepared until mid-December 2000 because Rana didn’t know how to do it.
Stricklin said Nacchio had a choice when he signed the document dated Nov. 3, 2000: He could have been honest, scratched out the date, and added the true date. By not doing this, Nacchio chose to make an “intentional deception” that would cheat others, Stricklin said.
Nacchio signed the backdated document because he knew (by mid-December 2000) that he possessed material information that Qwest's targets were too high, Stricklin asserted.
“Mr. Nacchio put his signature on this document because he knew what other investors outside the company did not know," Stricklin said.
Stricklin said later signing a backdated document "drives a stake into the heart" of the defense's good-faith defense.
3:20 p.m.: Lead prosecutor Cliff Stricklin tries to meet the government's burden of proof on Nacchio's state of mind at the time.
Stricklin offers jurors examples of some of Nacchio's "unguarded moments," from testimony by former investor relations director Lee Wolfe.
Wolfe said he told Nacchio repeatedly that analysts and investors were pressing for more disclosure.
“Can you guarantee me the stock price won’t go down?” Nacchio said, according to Wolfe.
“Screw ‘em, go tell them to buy,” Nacchio said at another point, Wolfe testified.
Stricklin said of the last comment by Nacchio: "That about says it all."
2:55 p.m: Lead prosecutor Cliff Stricklin says the government's case has nothing to do with Joe Nacchio being a rich man.
Stricklin says he would be the first one to wish someone following his dream, even if it's to become rich, good luck "and Godspeed."
"But you can’t violate the law to do it," Stricklin said. "Everyone has to have the same chance. You can’t bend the rules in your favor.”
Stricklin has countered the defense's assertion that there was tax pressure to sell his stock.
Stricklin said Nacchio had a choice, and taxation, stock diversification and option expiration aren't an excuse for violating the law.
2:40 p.m: "You’ve seen and heard what Joe Nacchio knew -- and what the investors didn't," lead prosecutor Cliff Stricklin tells jurors in the rebuttal of the defense closing arguments.
Stricklin is stressing that Nacchio having all of his options wasn't a "problem," as the defense asserted, "but a privilege." He said an executive's first obligation is to shareholders, not himself.
The answer to Nacchio's problem was a daily stock sales plan, supported by the Qwest board and Nacchio's longtime financial adviser.
But Stricklin noted that after a mere nine days, Nacchio stopped the program. Stricklin said that was because Nacchio couldn't sell his stock fast enough.
2:27 p.m: Defense completes closing argument. Prosecution's rebuttal to follow.
2:22 p.m: "If Joe Nacchio had a corrupt heart, if he was a man who was intent on cheating people, covering up, finding ways to slime on, he had the perfect out," defense attorney Herbert Stern said.
Stern reiterated Nacchio wanted to quit because of one of his son's emotional difficulties, and could have resigned in February 2001 and sold all the stock he had.
2:10 p.m: The government's whole notion of "one-timers" is "kind of silly," defense attorney Herbert Stern says.
"There's nothing wrong with the income that (Qwest) had," Stern said. He said one should consider all the revenue of a company.
When Qwest's one-time sales of network capacity were a significant part of the company, it broke down the numbers. But later that distinction wasn't necessary, and it was the auditors and audit committee, not Joe Nacchio, who decided that, Stern said.
1:25 p.m: What's in your heart matters as well as what's in your mind, defense attorney Herbert Stern tells jurors.
And is there any doubt in your mind, Stern asks jurors, "that (Joe Nacchio) believed in this company? That he wasn't dumping stock because (former Qwest president) Afshin Mohebbi left a note on his chair?"
Before lunch, Stern likened concern about reaching financial targets to talk one would hear "around any water cooler in any company in the United States."
The information was "not material," he said.
Stern said it was Nacchio who built Qwest. And while who is ultimately right or wrong about projections can have unintended consequences in the marketplace, Stern said this case is about whether there was "stealing, lying, cheating."
Nacchio "didn't run the company or sell stock on that basis," Stern said.
He noted the government didn't indict Nacchio until Dec. 20, 2005 -- more than five years after Nacchio told the public he would be selling a substantial number of his $5.50 options each quarter. "Judge what people did at the time."
Stern also has told jurors to look at the immunity deals that Mohebbi and former CFO Robin Szeliga got in order to tailor their testimony.
11:40 a.m.: Defense attorney Herbert Stern said that when Joe Nacchio sold his options in 2001 he was executing a plan announced to the public in October 2000.
He said Nacchio couldn't have been "cooking up some crazy scheme," given that announcement and the fact he gave some shares to his children and didn't sell any of his options priced at $28.50.
Stern has explained Nacchio went off his daily stock trading plan after just nine days in February 2001 because he wanted to set a floor of $38 for his sales and was "bullish on the stock."
Stern, who is 70 years old, apologized if jurors were growing tired of his closing argument, and he acknowledged he was growing tired too, but has an obligation to make the points.
A few minutes later, he again apologizes if his long closing argument has become "painful" to the jurors. "While I have no burden of proof, I can’t take a chance under the circumstances," he said.
11:25 a.m.: Defense attorney Herbert Stern has spent a good part of the morning trying to undermine the prosecution's reliance on former Qwest President Afshin Mohebbi and former CFO Robin Szeliga.
Stern has told the jury the insider-trading charges emanate from the Mohebbi memos, but he hasn't addressed all of the other former Qwest senior executives who expressed similar concerns that Qwest's public targets were unrealistic.
10:15 a.m. Defense attorney Herbert Stern has tried to show the government's indictment covering Nacchio's sale of $14 million of growth stock in early January 2001 relied heavily on a December 2000 memo by former Qwest President Afshin Mohebbi.
Stern portrayed the memo as suggesting ways to run the business better, and a normal discussion of challenges, rather than as a warning targets were a "huge stretch."
"He certainly wasn’t selling his growth shares because he received a memo from Mohebbi," Stern said after a break.
But the issue may come down to whether the jury believes prosecution allegations that Nacchio backdated the growth stock-sale document to Nov. 3, 2000, because he knew by mid-December 2000 Qwest's financial condition was beginning to weaken.
Stern maintained Nacchio had no motive to backdate the document, and gave his irrevocable instructions to sell the stock on Nov. 3, 2000. But former Qwest associate general counsel Yash Rana didn't know how to do such a document, Stern said, and the document was prepared later in December.
9:40 a.m.: Qwest made its targets 17 consecutive quarters, lead defense attorney Herbert Stern says in closing arguments.
The prosecution has been hampered by Judge Edward Nottingham restricting evidence about how Qwest under different management later erased $2.5 billlion of revenue from its 2000 and 2001 books.
Stern has consistently blamed Qwest's inability to make its targets in the second half of 2001 on the "unforeseeable economic turmoil that took place in 2001."
He said the issue is whether Joe Nacchio was acting in good faith, and being honest, honorable and doing his best when making forecasts.
Stern has peppered his closing argument with lines to the jury like: "I think you know," "I think you know what I'm referring to," "you also know."
He maintained Nacchio didn't believe the warnings by former executives that the targets were too aggressive, and "believed his job was to push them up."
9:20 a.m.: Prosecution's argument that "if you don't tell, you can't sell," is not the legal standard for insider trading, lead defense attorney Herbert Stern says in closing arguments.
Stern said Joe Nacchio had to have used the information, believed it, as a basis for selling.
He cited testimony by Nacchio's longtime financial adviser David Weinstein, who said Nacchio was bullish about Qwest's prospects at least until Aug. 13, 2001.
The insider-trading period covers the first five months of 2001.
The burden of proof is high.
Jurors will be getting an instruction later today that to convict Nacchio, he must be found to have sold his stock on the basis of the nonpublic information. It's not enough for prosecutors to prove Nacchio possessed material, nonpublic information when he sold the stock.
8:50 a.m.: Joe Nacchio "did not set the growth rate to pump up the price of the stock," lead defense attorney Herbert Stern said as he continued closing arguments this morning.
"That's simply not true," Stern said.
Stern again referred to a report by the investment banking firm Donaldson Lufkin & Jenrette that studied the prospects of a merged Qwest-US West. The merger was announced in July 1999, and completed in June 2000.
Stern again referred to a report by the investment banking firm Donaldson Lufkin & Jenrette that studied the prospects of a merged Qwest-US West.
Stern discredited the testimony by Lee Wolfe, Qwest's former investor relations director, who said Nacchio set the targets, and that he tried to persuade Nacchio the 15 to 17 percent growth targets didn't need to be set that high when the merger was announced in July 1999.
Stern has maintained DLJ set the projections after studying the merger, and Wolfe was lying.
8:46 a.m.: Lead defense attorney Herbert Stern is continuing his closing argument.