The insider-trading case opening against the former head of one the USA's largest telecoms could hinge on the interpretation of secret government deals and what a CEO should be expected to know about his company, an Associated Press report said.
The Associated Press report said Joseph Nacchio, former CEO of Denver-based Qwest Communications, is charged with improperly selling $101 million of stock months before the telephone service provider for 14 mostly Western states became mired in a multibillion dollar accounting scandal.
Prosecutors claim Nacchio, a Brooklyn-born former AT&T executive, sold his stock while knowing the company was at financial risk, the report said.
Shares of Qwest Communications International plummeted from more than $60 a share in 2000 to just $2 a share in 2002 and its near-collapse left thousands of pensioners in financial straits, the report added.
The report said Nacchio has an unusual defense: The sale wasn't improper, he maintains, because he believed Qwest stood at the time to get millions in secret contracts from clandestine government agencies. Within Qwest, he alone was privy to the contracts, he says.
The contracts are a key point of evidence. Both sides have agreed financial data from the contracts will be used at trial, through the agencies involved will remain secret, the report said.
The report said jury selection starts this week in a Denver federal court.
It could be a complex trial: Evidence includes some 13 million pages of material from classified documents; internal emails and memos; complicated financial tables; and statements from top Qwest executives during Nacchio's reign.
In the end, the case will come down to what Nacchio knew and his intentions when he sold the stock, legal analysts say.