March 10, 2007
Two Former CEOs Head to Trial
Two former CEOs will be headed to court in March to face charges related to their tenure at the top of large, publicly-traded companies. First, Lord Conrad Black, former CEO and controlling shareholder of newspaper publisher Hollinger International, Inc. -- now the Sun-Times Media Group -- faces charges along with three former company executives related to looting the company. The indictment (here) alleges mail and wire fraud, money laundering, and perhaps most ominously for Lord Black, RICO related to a series of deals in which he received substantial payments that the government alleges essentially stolen from the company. The trial is set to start on March 14 in U.S. District Court in Chicago, and may last up to three months. A Bloomberg story (here) provides a good overview of the case.
Out in Denver, former Qwest CEO Joseph Nacchio faces 42 counts of insider trading related to his sales of company stock that netted him over $100 million shortly before the share price collapsed. While Qwest had significant accounting problems, federal prosecutors brought an insider trading case rather than a broader securities fraud case of the type seen in the Enron and WorldCom prosecutions. The allegations against Nacchio focus on his knowledge that Qwest's financials were deteriorating over the five months of 2001 when he sold the shares. Insider trading charges will avoid much of the accounting minutiae that has bogged down other trials. One aspect of the defense has been the claim that Nacchio was privy to secret intelligence contracts that could bolster Qwest's revenue, and there has been an ongoing issue with discovery under the Classified Information Procedures Act, as discussed in a Denver Post story (here). Like most securities fraud cases, including insider trading prosecutions, the issues in the trial set to start March 19 in the U.S. District Court in Denver revolve around Nacchio's intent, whether his trading was motivated by knowledge of impending financial problems at Qwest, so that he sold to avoid substantial losses. (ph)
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