By Jim Spencer
SpencerSpeaks.com
July 28, 2007
They came for their symbolic pound of flesh, the people Joe Nacchio screwed. They filled a federal courtroom Friday. They craned their necks to see the Qwest executive who had fired some of them and had overseen a stock-price crash that cost others their life savings.
Some of them grinned at the prospect of the man who had ruined their lives getting sentenced for 19 counts of insider trading. Most simply stared at him. The lawyer for some retirees talked about karma, that what goes around comes around.
Where Nacchio is going he won’t be coming back for six years.
The convict - gray suit, white shirt, baby blue tie - sat amid a defense team that in a final “Screw you†to the folks in the seats is supposed to be paid for by Qwest shareholders. Estimates of attorney’s fees run to the tens of millions of bucks.
Somebody is sure to fight a clause in Nacchio’s contract that forces the owners of a stock to pay his legal bills. They’ll probably lose.
But the real loser on this day was Nacchio. Unless he wins on appeal, this one-time Master of the Corporate Universe with a net worth of hundreds of millions of dollars will be a federal prison inmate for six years.
That was Judge Edward Nottingham’s sentence.
Nottingham also ordered Nacchio to pay a $19 million fine and to return to the government more than $52 million in ill-gotten gains. Nacchio, a jury decided, made this money by selling Qwest stock and exercising stock options knowing his company was in deep trouble, but telling Wall Street and the public that everything was fine.
The personal tragedy Nacchio’s family faces with his sentence became clear when his lawyer argued that the judge should hear privately from the therapist of Nacchio’s son, David. David Nacchio’s attempted suicide came up during the trial. David Nacchio’s dependence on his father for support formed the basis of a defense request to keep Joe Nacchio out of prison.
Probation, Nottingham said, was simply not an option. So the doctor didn’t need to testify. And if he did, the judge said, the doctor would have to testify publicly, airing for everyone a family’s most intimate, sad secrets.
“May I address the court?†Nacchio asked Nottingham.
“Not at this time, sir,†the judge answered.
The mental health issue dominated the defense’s request for a lighter sentence.
“If Joe Nacchio becomes unavailable to David, that’s a serious problem,†defense lawyer Herb Stern argued. “The boy has been institutionalized three or four times. In order for him (David) to go back to the University of Pennsylvania, Joe Nacchio lived with him for four months.â€
The bond between father and son was so “critical and emotional,†Stern said, that it warranted a departure from sentencing guidelines.
As he spoke, Nacchio stood beside his lawyer weeping. In the row where Nacchio’s family sat, another son, Michael Nacchio, cried.
When it came time for Nacchio to speak to the judge, he passed.
Emotion dominated the hearing. But it did little to change the outcome.
The judge praised Nacchio for taking care of family and friends. But he added that many time white collar criminals have “two personalities - one for the people they know best and one for the public.”
Nottingham decided that Nacchio netted $28 million from his stock and option sales. The judge called greed the seed of Nacchio “destruction.†Nottingham said Nacchio created a culture at Qwest where insider trading was acceptable.
“In a way,” Mr. Nacchio is the classic Horatio Alger story,” the judge said of the son of Italian immigrants. “In many ways this is what the country expects of corporate executives - people who won’t epect less than the best. But perhaps because of a character flaw or greed, he went over the top.”
For that excess, Nacchio paid dearly.
“The court’s premise is that crimes of greed can be deterred by taking all the money (a person made illegally) and more,” Nottingham explained as he applied $71 million in financial sanctions. Crimes of greed must “cost far and beyond mere payback.”
Nottingham said he wanted to “promote respect for the law†and to prove that there is one legal standard that applies to the rich as well as everyone else. With thayt in mind, the judge turned down a request to allow Nacchio to remain free pending appeals. Nottingham did, however, did not make Nacchio leave the court in handcuff. The disgraced captain of industry must surrender himself 15 days after the federal Bureau of Prisons decides where he’ll serve his time. He’d like to go to a facility near his family in New Jersey.
After learning his fate, Nacchio made a final attempt to speak to the judge as Nottingham left the bench. He was restrained by his lawyer.
“It was a sad show” said Hazel Floyd, a US West retiree who lost a chunk of her life savings when Qwest stock plummeted fromn $60 a share to $1 a share. “I’m pleased that he has to pay something back and serve some time.”
Almost everyone except Nacchio and his lawyers agreed. It was a tough message. But it had to be sent.
6 users commented in " Judge Steps Up; Nacchio Goes Down "
Follow-up comment rss or Leave a TrackbackYeah, Nacchio had a pretty sad sob story for the judge. But there are a lot of people who got screwed by Nacchio’s greed that have stories a lot sadder. Maybe he should have considered the consequences of being away from his family and ruining his life when he was stealing other people’s life savings and ruining THEIR lives.
How much is enough Joe?
Jim,
Great article about a real white collar crook who took so many people down the road of demise. You are so articuate with your words and a gret wordsmith. Keep up the good work on this site!
Barry
Terrific column Jim, and unbiased as well.
All of these ex-CEOs try everything to pull rabbits out of their hats, but the rabbits, in most cases, turn into cobras, and bite back.
Three huge cheers for Judge Nottingham for seeing through the smoked glass being presented by highly paid lawyers whose fees are another burden of the Qwest shareholders. Sounds to me like he was planning this along time ago. Sad, sad, sad.
Once again justice has worked. These greedy CEO’s must mend their ways and stop thinking they are above the law. I only hope the poor retirees get some of their lost money back. Such a shame when someone so rich has to take money from those working all their lives and making pocket change compared with him.
At least he’s been de-smirked. That must have very frustrating to all the people who lost their retirement savings.
Weep not for Joe Nacchio and his family. I suspect he was sufficiently clever to have contributed some of his swag to both the National Republican and National Democratic Parties. So political “quid pro quo” dictates that President Bush will grant him a pardon toward the end of his reign. And if he doesn’t, his Democratic successor probably will once most of the public has forgotten the matter. (Remember all the gold-plated felons that President Clinton pardoned?) It seems this is just The New American Way.
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