Wednesday, July 11, 2007
The sentencing of former Qwest CEO Joseph Nacchio is currently set for July 27, and prosecutors and defense counsel filed sentencing documents with the district court on July 6 (available below). Nacchio was convicted on nineteen counts of insider trading for sales of Qwest stock in 2001 that resulted in a gain of approximately $52 million; the jury acquitted him on twenty-three other counts. All of the sales took place before the company announced a significant decline in its business and accounting problems that caused the stock to drop by over 90%.
The government recommends a sentence of 87 months based on the Federal Sentencing Guidelines calculation that uses the $52 million gain to enhance the prison term. Under the Guidelines, Nacchio's offense level is 27, which leads to a sentencing range of 70 to 87 months, and prosecutors argue that abusing his position as CEO to profit at the expense of investors supports a sentence at the top of the Guidelines range. The sentencing calculation applies the 2000 version of the Guidelines because the insider trading took place before a substantial increase in the recommended sentencing for economic crimes took effect at the end of 2001. If the more severe version of the Guidelines was in effect, Nacchio would be looking at a sentencing range of 151 to 188 months. As it is, even if U.S. District Judge Edward Nottingham sentences him to the lower end of the Guidelines range, he is still looking at a prison term of nearly six years. Nacchio argues that the gain should only be caculated at $1.8 million based on a "civil damages analysis" that looks to the effect of the undisclosed information on the value of the stock. That figure would yield a Guidelines sentencing range of 41 to 51 months.
Nacchio's lawyers have argued for a downward departure from the Sentencing Guidelines "because of extraordinary circumstances concerning the effect that a lengthy period of incarceration will have on the health and potentially even the life expectancy of two of his immediate family members, and because of Mr. Nacchio’s prior good works." Charitable and civic works are frequently cited in white collar crime cases, but as the U.S. Attorney's Office notes in its filing, both grounds are usually not the basis for a downward departure unless the situation is unusual (for family matters) or extraordinary (for charitable works). (ph)