Insider trading trial of former Qwest CEO opens

By Keith Coffman

DENVER, Colorado (Reuters) - Former Qwest Communications International Inc. (Q.N) chief executive Joseph Nacchio sold $100 million in stock based on non-public information that the company faced financial troubles, prosecutors said on Tuesday in opening arguments at Nacchio's trial for insider trading.

But defense attorney Herbert Stern said Nacchio did not mislead investors about the regional phone carrier's finances and had secret knowledge of upcoming government contracts that would boost income.

"This is a case about cheating," Assistant U.S. Attorney James Hearty told the jury in federal court. "Corporate insiders are in a position to take advantage of information people on the outside don't know."

He said Nacchio, 57, sold $100 million in Qwest shares during a five-month period in 2001 after other company officials told him his aggressive revenue forecasts could not be achieved.

Stern said the charges in the 42-count indictment were "absolutely false" and that Nacchio's projection matched company performance.

Nacchio alone knew that Denver-based Qwest could obtain national defense contracts worth millions of dollars that would help company finances, Stern said.

Former Qwest investor relations director Lee Wolfe, the prosecution's first witness, testified that under Nacchio "the golden rule at Qwest was that you never did anything to make the stock price go down."

Nacchio's five-year tenure at the head of Qwest was marred by civil and criminal legal action including lawsuits by shareholders and the U.S. Securities and Exchange Commission, and criminal investigations of its former executives.

He was ousted in 2002 after Qwest had to restate $2.2 billion in revenue and the company's stock price fell below $2 per share.

Each count against him carries a maximum sentence of 10 years in prison and a $1 million fine. He also faces possible forfeiture of the money he made from the alleged inside trades, if convicted.