Ex-Qwest official says Nacchio dismissed investors' concerns
DENVER -- Joseph Nacchio, the former Qwest Communications International Inc. chief executive on trial for insider trading, dismissed investors' concerns about the way the company reported revenue, an ex-investor relations chief said.
Nacchio, 57, refused to release detailed data in 2000 and 2001 to shareholders and analysts who asked whether Qwest was relying on one-time sales of network capacity to meet growth targets, Lee Wolfe told federal jurors yesterday.
"He would say, 'Why do they need to know?' " Wolfe testified during his cross-examination. "I would say, 'To make an informed decision on whether to buy or sell the stock.' Basically his response was, ' Go tell them to buy.' "
Nacchio is accused of selling $101 million in company shares from January to May 2001 based on inside information that Qwest couldn't meet sales forecasts through recurring revenue. Nacchio denies engaging in insider trading, saying he believed the targets were accurate.
Wolfe ended a third day of testimony before former director Craig Slater told jurors about how Nacchio acquired his stock options. Wolfe said Qwest made no disclosure from 1999 to August 2001 about the extent of its reliance on one-time sales of capacity on the company's fiber-optic network.
Qwest disclosed in August 2001 that one-time transactions accounted for 5 percent of its 2000 revenue and 8 percent of 2001 revenue. The disclosure left analysts "very upset" and was still misleading, because it understated the extent of nonrecurring revenue, Wolfe said.
On cross-examination, Nacchio attorney John Richilano sought to show that Wolfe lacked detailed knowledge of Qwest's finances.
"You did not attend these financial meetings in which determinations were made as to how revenue was broken out?" Richilano asked Wolfe. "I didn't attend the meetings but I got the reports coming out," Wolfe said.
Richilano also asked whether Qwest's projected revenue included the value of classified government contracts.
"Were you aware that secret government contracts were not included in the guidance?" Richilano said.
"I didn't know if they were or not," Wolfe said.
