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Nacchio Defense Attorneys Ask For Mistrial

Defense Argues 'Victim' Testimony About Losses Not Permissible

POSTED: 10:28 am MDT March 26, 2007
UPDATED: 7:22 pm MDT March 26, 2007

As the insider trading trial of former Qwest Chief Executive Officer Joe Nacchio enters its second week, defense attorneys asked for a mistrial because of testimony that was presented last week.

Defense attorneys on Monday filed a motion to strike testimony of retiree Sally Anderson, who testified last Thursday that she bought more stock in the company after Nacchio sent an optimistic e-mail to employees in September 2000.

Defense attorneys argued that she cannot be deemed a victim of alleged insider trading, and moved for a mistrial on the basis that prejudicial, inadmissible testimony was presented to the jury. Defense attorneys also moved to exclude investor testimony.

Prosecutors allege that Nacchio, 57, sold the stock based on nonpublic information that the company could be at financial risk and may not meet revenue targets.

He is charged with 42 counts of insider trading.

But the defense contends that wasn't why Nacchio was selling and that Nacchio believed in Qwest's publicly stated financial targets.

The defense argued that Anderson testified only about stock that she bought in 2000 -- not 2001 -- and that the only people who can be deemed "victims" in this case are the people who bought the stock that Nacchio sold in 2001.

The motion claimed that Anderson's testimony was "not proper victim testimony" and is irrelevant to the trial.

The judge has ruled that testimony about investors' losses is not permissible at trial because prosecutors must show only that he sold the stock because he had information that wasn't available to the public -- not that his sale negatively affected anyone.

Prosecutors have not responded to the motion. But when they do, the judge will then issue his ruling.

In the meantime, prosecutors on Monday presented evidence asserting that Nacchio had inside knowledge when he sold the stock.

Prosecutors have lined up several lower-level managers and executives to testify about Nacchio's actions and beliefs when he sold $101 million in stock in 2001.

On Monday morning, former CFO Robin Szeliga took the stand. She testified that Nacchio reiterated the need for the company to hit the five-year growth rate, saying it was "very important" for Qwest to be considered a growth company by Wall Street.

The prosecution presented a DVD in which Nacchio is seen in a meeting with employees, saying, "It's grow or die. We'll grow, die or sell."

Szeliga said that in late 2000, several mid-level managers within the company presented concerns about not hitting the revenue projections for 2001. Szeliga said the managers were concerned budgeted growth could not meet target numbers.

At which point, Szeliga said, Nacchio consistently demanded the company hit those numbers, and even asked a mid-level manager to, "Go back, figure out a way to close the gap and meet the target numbers."

The "gap" refers to the discrepancy between internal target numbers and budgeted growth. In some instances, the "gap" was hundreds of millions of dollars short of the target goals.

The department heads were concerned they would miss the targeted projections.

Szeliga is serving probation after pleading guilty to one count of insider trading.

Nacchio has pleaded not guilty to all counts of insider trading. He could face up to 10 years in prison and a $1.5 million fine on each count if convicted.


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