by Greg Farrell USA Today
Federal prosecutors in Colorado have filed court papers that indicate
they could be close to bringing criminal charges against Joe Nacchio,
the hard-charging former CEO of Qwest.
In a motion filed late Wednesday in federal court in Denver, acting
U.S. Attorney William Leone asked a judge to stay a civil lawsuit that
the Securities and Exchange Commission filed earlier this year against
Nacchio and other former Qwest executives. The judge granted the
The motion comes just two weeks after prosecutors secured a guilty
plea from Robin Szeliga, Qwest's former CFO. Szeliga pleaded guilty to
one count of illegal inside trading and agreed to cooperate with the
ongoing criminal investigation.
The most likely reason for the prosecutors' request, experts say, is
that Nacchio is in the U.S. attorney's crosshairs.
"The only time the Department of Justice asks for a stay is because it
is going down the road of returning an indictment," said Jacob
Frenkel, a former federal prosecutor now with Shulman Rogers.
Jack Coffee, an expert on securities law at Columbia University, says
prosecutors often use the cooperation of CFOs to prepare charges
"If this follows standard operating procedure, she stands in relation
to Nacchio as Scott Sullivan stood to Bernie Ebbers," he said,
referring to WorldCom's former CFO and CEO.
Nacchio's attorney, Charles Stillman, and the U.S. Attorney's Office
in Denver did not return calls. In March, a Nacchio spokeswoman said
he would fight the SEC charges vigorously.
Like other telecommunications companies, Qwest's stock was a highflier
during the Internet bubble. But after the bubble burst, Qwest
sustained huge losses. It also admitted to some overly aggressive
accounting maneuvers, and eventually restated its earnings downward by
some $3 billion.
The disclosure of accounting irregularities drew the interest of the
SEC as well as the U.S. attorney in Denver. The SEC accused Nacchio
and six other executives of orchestrating a "massive fraud" by booking
phony revenues and relying on other accounting machinations. The SEC
accused Nacchio of reaping $176 million in illegal inside-trading
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