Key Witness Takes Stand In Nacchio Trial

First Full Day Of Testimony Begins With Former Qwest Exec Lee Wolfe

A key witness for the prosecution took the stand Wednesday in the first full day of testimony in the insider trading trial of former Qwest CEO Joe Nacchio.

The witness, former Qwest executive Lee Wolfe, admitted to jurors that he was part of the deception, and said, "I knew what we did was wrong."

Wolfe is a key witness because he can describe what is was like at Qwest as the company went from really good financial times to troubled times. He can also account for what Qwest executives were telling investors.

Wolfe earned more than $1 million in stock sales in 2002. But, Wolfe told jurors, by the end of that year insiders knew the company had potential problems.

The economy was slowing and the telecomm industry was over billed, and much of Qwest revenue came from one-time only sales.

"I believe that the government is laying that foundation that this was more than just bad judgment," said Denver University business professor Dr. Kevin O'Brian. "There may have been criminal intent related to selling the stock."

Wolfe said he warned Nacchio of the troubles ahead, claiming he told Nacchio that he was being too aggressive in promoting the company's stock. Wolfe said by Spring 2001 investors had "a suspicion that something funny was going on."

During that time, Nacchio continued to sell millions of dollars worth of stock.

The defense countered Wolfe's testimony by saying Wolfe may not have known what Nacchio was thinking, and that Nacchio was known as an aggressive positive thinker.

Nacchio faces 42 counts of insider trading. The terminology is at times complicated, and one of the challenges for the prosecution is to make it all understandable to the jury.

"There was some aspect of the accounting related to this, but I think jurors would be able to understand it -- that there are some concerns about those financial statements," O'Brian said.

The trial is expected to last at least seven weeks.

Wolfe admits he could potentially face some charges of insider trading. However, it appears he reached some sort of a plea bargain in exchange for his testimony against Nacchio.

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