The insider trading trial of former Qwest Communications Chief Executive Joe Nacchio got under way Monday as the judge began questioning potential jurors about how they got their news.
Nacchio, 57, is accused of improperly selling about $101 million worth of stock based on internal, nonpublic information that the telephone company was at financial risk. Qwest soon after became mired in an accounting scandal and was forced to restate $2.2 billion in revenue.
Nacchio, who resigned under pressure in 2002, is charged with 42 counts of insider trading for stock sales that occurred in the first five months of 2001, with transactions ranging in worth from $191,000 to $13.6 million each. Each count carries a penalty of up to 10 years in prison and a $1 million fine.
Nacchio’s defense is built around the argument that Nacchio expected Qwest Communications International Inc. to win lucrative contracts from clandestine government agencies — contracts Nacchio has said gave him hope for the future of Denver-based Qwest, whose territory crosses 14 states mostly in the West and Midwest.
Nacchio, smiling and dressed in a gray suit and blue shirt, arrived at the federal courthouse about 30 minutes before the trial was scheduled to begin.
During the proceeding, he sat at a table, flanked by his attorneys, former federal judge Herbert Stern of New Jersey and John Richiliano of Denver.
An unspecified number of prospective jurors was called at the start of the process to select 12 jurors and six alternates. The trial is expected to last as long as eight weeks.
Four potential jurors were dismissed by late morning, one for unspecified personal reasons and the others during questioning about their media habits.
Prosecutors likely will be looking for individuals who believe that everyone, from minimum wage workers to high-level executives, should play by the same basic rules with no breaks or advantages, says Robert Hirschhorn, a Lewisville, Texas, jury consultant.
“It’s not demographics that define decisions jurors make,” he said recently. “It’s their value system and their life experience that is the single biggest factor in determining what verdict they’re going to return.”
Nacchio’s attorneys will seek jurors who understand the complexities of the financial world and may be more willing to accept the defense’s explanation of the stock sales, California jury consultant Howard Varinsky said.
U.S. District Judge Edward Nottingham already has made certain that none of the jurors will be current or former employees of Qwest or people who have close friends or relatives associated with the company.
Nacchio’s indictment stems from a years-long government investigation into the accounting scandal that nearly sank Qwest.
Federal regulators say Qwest falsely reported sales of capacity on fiber optic cables as recurring instead of one-time revenue between April 1999 and March 2002.
That allowed the company to improperly report approximately $3 billion in revenue, which helped pave the way for its 2000 acquisition of former Baby Bell U S West Inc., the Securities and Exchange Commission has charged.
Nacchio also is a defendant in an SEC civil fraud case stemming from the scandal.