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NEW YORK (CNN/Money) -
Former Qwest Communications Chairman and CEO Joseph Nacchio, who is facing a federal probe into possible insider trading, reportedly is arguing that he thought the company's outlook was good during the time he sold shares because he knew his telecom was due to land lucrative secret national-security-related work.
The Wall Street Journal, quoting people familiar with the case, says Nacchio's attorneys are trying to head off any indictment by arguing that he was in a unique position to believe the company was performing as claimed because he knew Qwest (Research) had won some national-security contracts and was poised to get more.
The paper reports that a decision on indicting Nacchio is expected by year's end. Rather than charges that he falsified the Denver-based company's financial results, the Journal reports that prosecutors are instead looking at whether Nacchio knew of pending problems at the company when he made a $176 million profit selling Qwest stock from 1999 through 2001.
The company eventually revealed accounting problems that caused it to restate $2.5 billion in revenue and $2.2 billion in earnings for 2000 and for 2001, the paper reported.
But the paper said prosecutors failed to convict four former midlevel Qwest executives charged with 44 counts that they improperly booked sales. Two executives were acquitted in a 2004 trial and the other two later pleaded guilty to reduced charges and agreed to cooperate with prosecutors.
Nacchio has argued that his stock sales were part of a prearranged trading schedule aimed at keeping his overall portfolio diversified and at raising funds to pay taxes on the exercise of stock options that were about to expire, the paper reported.
As to whether he knew of the problems the company faced due to its accounting issues, the paper reports that Nacchio will argue that by serving on two federal advisory panels that dealt with security and telecommunications issues -- the Network Reliability and Interoperability Council and the National Security Telecommunications Advisory Committee -- he knew generally about the government's needs and the company's prospects for future sales.
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