Experts say ex-Qwest CEO’s hubris spilled over onto attorneys
The defense team of convicted former Qwest CEO Joe Nacchio may have displayed the same hubris and overconfidence as their defendant did when he sold chunks of Qwest stock just before the company’s fortunes plummeted.
By only calling three witnesses — which, contrary to reported plans, did not include former U.S. cybersecurity chief Richard Clarke nor Nacchio himself — experts say Nacchio’s attorneys believed they had little work to do to unravel the prosecution’s assertion that the defendant sold $101 million worth of stock before it tanked while publicly trumpeting the carrier’s prospects.
They were wrong. Nacchio was convicted this week of 19 of the 42 counts against him. He faces as many as 10 years in prison and $1 million fine on each count, plus the forfeiture of assets.
He will be sentenced July 27.
“I was really surprised at the defense’s approach,” says Mathew Hayward, assistant professor of management at the University of Colorado at Boulder’s Leeds School of Business. “It seemed to have reeked to me of overconfidence. I got the impression that they always thought they were going to win, that there was a limited amount of hard evidence that they needed to provide, that there would be no need for Nacchio to personally defend his position.”
Hayward says the defense’s tactics are particularly surprising given it was led by longtime and prominent attorney Herbert Stern, who has received many accolades for his skill and ferocity.
“I think right up until that ‘guilty’ word was uttered, he and Stern believed he was going to get off,” Hayward says. “So I think the overconfidence that Nacchio had as an executive at Qwest spilled over into the way that they conducted their defense trial.”
Stern’s office did not immediately comment on these assertions and its defense strategy, including the absence of testimony from Clarke. The three defense witnesses included Qwest founder Philip Anschutz and a Catholic abbot, who testified about Nacchio’s state of mind and desire to resign from Qwest after learning of his son’s suicide attempt in January 2001.
Nacchio reportedly met with Clarke, former special advisor to President Bush on cybersecurity matters, in 2001 to discuss ways to bulletproof the government’s network from cyberterrorism. Nacchio’s lawyers reportedly hop ed to show that the meeting led Nacchio to believe Qwest was about to win lucrative national security contracts that would fuel the company’s financial growth.
That was to be a key point in Nacchio’s defense — that he had inside, classified knowledge that Qwest was about to realize financial gains and that his stock trades were motivated by factors other than fading fortunes.
Clarke may testify during the appeal process, says Kevin O’Brien, an associate professor specializing in corporate governance issues at the University of Denver. O’Brien recorded a daily blog of the trial.
“Stern basically told the judge that [the defense] can’t really bring up evidence to combat the government’s position that Qwest really had no reasonable expectation to have any material contracts during the foreseeable future,” O’Brien says. “According to Stern, the defense’s attack of the government position on that was not going to be admissible. So they said, ‘we’re not going to bring it up at all.’”
O’Brien says the prosecution’s position all along was that Nacchio’s expectation of classified government contracts was not material and “pure conjecture.”
“Indeed, Qwest never got any contracts,” O’Brien notes.
But that testimony may not have mattered at all.
“All through the trial the judge accused [Stern’s team] of being unprepared,” O’Brien says. “The government was very prepared, they kept it simple.
“I’m wondering if Nacchio’s attorneys or Joe Nacchio is going to second guess for the rest of his life that he didn’t get on the stand.”
