Joseph Nacchio, the former chief executive of Qwest Communications, was charged on Tuesday with 42 counts of insider trading related to his sale of $100.8m of stock in the once high-flying US telecoms group,
Mr Nacchio, 55, has denied any wrongdoing. He is the latest senior US executive to face charges related to their actions during the internet bubble years. Bernie Ebbers, former chief executive of WorldCom, was sentenced to 25 years in July for leading the largest fraud in US history. The trial of Kenneth Lay and Jeffrey Skilling, former Enron senior executives, is due to begin next month.
The charges against Mr Nacchio, read out in a federal court in Denver, follow a three-year investigation of Qwest and its former management by federal prosecutors and the Securities and Exchange Commission that have already led to a string of indictments and settlements.
Prosecutors have charged at least six other former executives of Qwest since the Justice Department began its probe of the company in 2002. Among them, Robin Szeliga, Qwest’s former chief financial officer, pleaded guilty in July to insider trading and agreed to co-operate with investigators.
In the meantime, the SEC sued Mr Nacchio in March, claiming he orchestrated a $3bn fraud at Qwest between 1999 to 2002 when he was ousted after the telecoms bubble burst and Qwest’s stock plunged amid allegations of accounting fraud at the company.
Qwest agreed last year to pay $250m to settle SEC fraud allegations. The SEC accused Qwest’s former management of inflating sales to meet Wall Street expectations through a web of bogus transactions.
Boosted by surging revenues and predictions of continuing strong growth, Qwest’s shares reached a closing high of $64.50 in March 2000, valuing the company at $108bn. The shares sank to a low of $1.11 in August 2002, two months after the board forced Mr Nacchio to resign
Mr Nacchio, who ran AT&T’s consumer unit before joining Qwest in the mid-1990s, took advantage of investor optimism to make a series of high-cost acquisitions and load Qwest with debt to finance an extensive fibre-optic network.
Richard Notebaert, who replaced Mr Nacchio as chief executive, has nursed the company back to health, selling off non-core assets and reducing debt while rebuilding employee, investor and customer confidence.