Former Qwest CEO misled investors, witness charges

By Keith Coffman

DENVER (Reuters) - Former Qwest Communications International Inc. (Q.N) Chief Executive Officer Joseph Nacchio misled investors about the company's finances at the same time prosecutors say he sold $100 million in stock, a former colleague testified on Wednesday in Nacchio's trial for inside trading.

Lee Wolfe, the regional phone carrier's former investment relations director, said Qwest was reporting big revenue gains, but not disclosing they were often from one-time transactions, not real business growth.

Throughout 2000 and early 2001, Nacchio touted the company's 20 percent revenue gains, even though investors were growing wary because other firms in the industry were revising their numbers downward, Wolfe testified.

"The feedback I was getting was there were concerns about his (Nacchio's) credibility," Wolfe said.

Nacchio, 57, is accused in a 42-count indictment of selling more than $100 million of Qwest stock in 2001 after Wolfe and other company insiders privately warned him the Denver-based company could not meet its publicly stated revenue goals.

Wolfe was no angel in this regard, admitting during testimony that he sold $646,000 worth of Qwest stock on insider trades in early 2001. He said he received immunity from prosecution in exchange for testifying against Nacchio.

"I knew what we did was wrong and I was concerned about criminal prosecution," Wolfe said of his deal with the government.

Nacchio has pleaded not guilty and on Tuesday his attorney said in opening arguments he had not misled investors about revenue projections because he knew of possible upcoming defense contracts that were going to bring in big money to Qwest.

He was ousted in 2002 after the company had to restate $2.2 billion in revenue for the previous two years, and became the target of federal regulators and prosecutors.

If convicted, Nacchio faces a maximum 10-year sentence, a $1 million fine and possible forfeiture of the $100 million in proceeds from the disputed stock sales.

The trial got underway on Monday and resumes Thursday.