updated 3/29/2007 12:11:28 PM ET 2007-03-29T16:11:28

Prosecutors lost a bid Thursday to introduce evidence at Joe Nacchio’s insider trading trial that they said showed the former Qwest CEO tried to conceal $90 million in assets “to avoid suffering a loss.”

U.S. District Judge Edward Nottingham said the transfer of assets into accounts solely owned by Nacchio’s wife occurred some 10 months after the stock sales that are the subject of his insider trading trial and were too far apart for jurors to draw conclusions about Nacchio’s state of mind.

“The court is not convinced of the similarity of the insider trading of which the defendant is charged and the later transfer of assets,” Nottingham said in ruling from the bench.

He also said he did not want the jury to be distracted with testimony about the transfer and the fact that Nacchio “is a wealthy man.”

Nacchio, who resigned under pressure from Qwest Communications International Inc. in 2002, is accused of 42 counts of insider trading for $101 million in stock sales in the first five months of 2001. Each count carries a penalty of up to 10 years in prison and a $1 million fine.

Prosecutors say Nacchio based his sales on non-public information that Qwest could be at financial risk because it relied on one-time fiber-optic sales to help meet financial targets.

Prosecutor Kevin Traskas had asked the judge to allow testimony from David Weinstein, a financial consultant to Nacchio, about Nacchio’s transfer of more than $90 million in assets five years ago, including Qwest securities, into his wife’s accounts.

In the motion filed outside the jury’s presence, Traskas asked for permission to introduce evidence about the February 2002 transfer to counter the defense’s contention that Nacchio did not sell personal shares of Qwest Communications from 2001 through 2002.

Nacchio was motivated by a “desire to hide his assets” and “to avoid suffering a loss, which bears strong similarity to the desire that motivated his insider sales several months before,” Traskas alleged.

Defense attorney Herbert Stern argued that the asset transfer was irrelevant because it occurred after the time period in which Nacchio is accused of insider trading.

Nacchio has acknowledged exercising stock options in the first five months of 2001 to earn $101 million, which are the transactions at issue in the trial.

The defense says Nacchio was forced to exercise stock options under terms of his contract, but that he was optimistic about the company’s future because he anticipated lucrative contracts with clandestine government agencies.

The government’s case is grounded in 2000 and 2001, when Qwest acquired U S West.

SEC regulators say Qwest falsely reported one-time sales as recurring revenue between April 1999 and March 2002. That allowed the company to improperly report approximately $3 billion in revenue, which helped it acquire U S West, the SEC has alleged.

Based in Denver, Qwest is the primary telephone service provider in 14 mostly Western states.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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