April 19 (Bloomberg) -- Joseph Nacchio, former chief executive of Qwest Communications International Ltd., was convicted of insider trading, capping a five-year federal crackdown on corporate crime after the collapse of Enron Corp.

A U.S. jury in Denver today found Nacchio guilty of 19 counts of insider trading for selling $52 million in Qwest shares in April and May 2001 based on private warnings that the company would miss revenue targets. Nacchio was found not guilty on 23 counts related to earlier trades totaling $49 million.

``The term `convicted felon Joe Nacchio' has a very nice ring to it,'' said Colorado U.S. Attorney Troy Eid outside the courthouse following the verdict. ``Make no mistake, my friends, this is an overwhelming determination of guilt.''

Nacchio, 57, faces 10 years in prison and a $1 million fine on each count when he is sentenced July 27. U.S. prosecutors have won convictions of hundreds of corporate executive since Enron's bankruptcy in 2001. They include ex-chief executive officers Jeffrey Skilling of Enron, Bernard Ebbers of WorldCom Inc. and John Rigas of Adelphia Communications Corp.

Nacchio, who built Qwest into the fourth-largest U.S. phone company and presided over a $100 billion drop in market value, strode out of the courthouse with his wife Anne. They did not comment. His attorney, Herbert Stern, also declined comment.

The jury of eight men and four women, which began hearing evidence on March 20, convicted Nacchio on its sixth day of deliberations.

Forfeiture

U.S. District Judge Edward Nottingham refused a request by Assistant U.S. Attorney Cliff Stricklin to increase Nacchio's bail from $2 million to $5 million. Nottingham said Nacchio posed no risk of flight. The judge will determine at sentencing how much Nacchio must forfeit in assets.

``We think it was a very thoughtful verdict,'' Stricklin told reporters outside the courthouse. ``They certainly saw at some point that Joe Nacchio knew what the investors didn't and chose to profit from it.''

Nacchio, who was CEO from 1997 to 2002, didn't testify in his own defense. The defense presented only three witnesses, including Qwest founder Philip Anschutz and a priest from Nacchio's home state of New Jersey.

``Herb Stern's a great lawyer, and I would never, ever question his judgment on a call as difficult as that,'' Stricklin said. ``We were fully prepared to cross-examine him.''

Good Faith

Stern argued to jurors that Nacchio acted in good faith and believed Qwest would meet the projections after buying US West in 2000. Nacchio sold stock to diversify his portfolio, exercising options due to expire, Stern said.

The ex-CEO discounted warnings from top executives at Qwest in late 2000, who said the Denver-based company would fall short of its public revenue target of up to $21.7 billion in 2001, Stern said.

Before trial, Nacchio said he would present evidence that he believed Qwest would make its forecast because he alone knew of the company's chances of securing secret government contracts. Nacchio never presented such evidence because of unfavorable rulings from Nottingham, according to his court filings.

Assistant U.S. Attorney Leo Wise prepared the confidential court filings on the secret-contracts defense. After the verdict, he said ``the key reason we didn't hear about it is because most of it wasn't true.''

Nacchio joined Qwest from AT&T Inc. in 1997 and continued to return to his New Jersey home on weekends. He was ousted by Qwest directors in June 2002 as a criminal probe began.

`Huge Stretch'

During the trial, former Qwest President Afshin Mohebbi said he warned Nacchio in December 2000 that the targets would be a ``huge stretch.'' Former Chief Financial Officer Robin Szeliga testified that she warned her boss of a $1 billion gap.

Stern said those discussions were about higher internal budgets, not public targets given to investors. Qwest made its earnings targets in the first two quarters, and Nacchio believed in forecasts first devised by investment bankers, Stern said.

``Maybe his business projections didn't come true,'' Stern said. ``Maybe the same optimism, energy, drive and ambition that built the company in the first place led him in the end to miscalculate what could be achieved in the terrible year of 2001. That may be true. But that is not a crime.''

Qwest lowered its public forecast by $1 billion in September 2001. Before that, several executives said, Nacchio refused to disclose Qwest's use of one-time sales of network capacity while overstating the growth of recurring revenue.

`Screw Them'

In his testimony, former Qwest investor relations chief Lee Wolfe said that when he asked what to tell Wall Street analysts who pressed for details of one-time sales, Nacchio said, ``Screw them, tell them to go buy.''

Two analysts told jurors they lowered their opinion of Qwest after the company began to disclose in August 2001 the extent of its reliance on one-time sales.

The government contended that Nacchio accelerated his stock sales upon learning in April 2001 that Qwest missed its first- quarter forecasts for recurring revenue. Nacchio exercised and sold $34 million in shares from April 26, 2001, to May 1, 2001.

Prosecutors attacked Nacchio's good-faith defense, pointing to a document dated Nov. 3, 2000, that authorized the sale of $14 million in shares. They said it was backdated by Nacchio in mid- December because he had heard the bad news. Stern said the document was just a way of recording Nacchio's decision to sell.

Jurors saw several video clips of Nacchio giving upbeat forecasts. They also heard evidence that his net worth, including stock options, was $547 million in 2000.

``Today, 12 very courageous jurors right here in Denver sent a very strong message all the way to Wall Street,'' Assistant U.S. Attorney Colleen Conry said after the verdict.

Anschutz

In their defense testimony, both Anschutz and the priest told jurors Nacchio sought to resign from Qwest in January 2001 after one of his two sons attempted suicide. Stern claimed he could have left Qwest then and exercised and sold his stock options without legal consequence.

Nottingham didn't allow jurors to hear evidence that Qwest restated $2.5 billion in revenue after Nacchio left the company.

Nacchio still faces a lawsuit from the U.S. Securities and Exchange Commission that accuses him of directing a $3 billion accounting fraud. He also faces investor lawsuits.

Qwest shares reached a closing high of $64.50 in March 2000 on expectations of use of its fiber-optic network. Shares sank to $1.11 in August 2002. Richard Notebaert, Nacchio's successor, averted a collapse by selling the company's phone-book unit and slashing borrowings to $17 billion from $26 billion.

The case is USA v. Nacchio, 05-cr-545, U.S. District Court, District of Colorado (Denver).

To contact the reporter on this story: David Voreacos in Denver federal court at dvoreacos@bloomberg.net; Joel Rosenblatt in San Jose, California, at jrosenblatt@bloomberg.net.

Last Updated: April 19, 2007 21:02 EDT