Former Qwest Chief Nacchio Sues Trial Lawyers for Malpractice, Overbilling

Joseph Nacchio, the former Qwest Communications International Inc. (Q) chief executive officer convicted of insider trading, sued his defense lawyers, claiming they were negligent and “grossly overbilled him” for costs including underwear.

Nacchio, 61, is serving a 70-month prison sentence after his conviction in 2007 for illegally selling $52 million of stock in Denver-based Qwest in 2001 based on inside information. Nacchio claimed in a lawsuit filed today that he was convicted “as a result of” professional negligence by attorney Herbert Stern and his law firm, Stern & Kilcullen LLC in Roseland, New Jersey.

The firm billed Nacchio more than $25 million to defend criminal and civil matters, charging tens of thousands of dollars for staff breakfasts, attorney underwear and in-room movies during the trial in federal court in Denver, according to the complaint in state Superior Court in Newark, New Jersey.

“S&K was negligent and careless in handling the defense of the criminal action,” according to the complaint. “Among other things, they were barred by the trial court from calling a critical expert witness by virtue of their blatant failure to comply with basic litigation procedures.”

Nacchio, who is serving his term at the federal prison in Minersville, Pennsylvania, is seeking compensatory and punitive damages, as well as attorney’s fees.

Stern’s partner, Kevin Kilcullen, also was named as a defendant. The two men didn’t immediately return calls seeking comment.

Resentenced

Nacchio, of Rumson, New Jersey, was resentenced last year by U.S. District Judge Marcia Krieger in Denver after a federal appeals court ruled a different trial court judge incorrectly calculated his gains from stock sales. Krieger’s 70-month sentence reduced Nacchio’s original term by two months.

After his conviction, Nacchio was fined $19 million and agreed to forfeit $44.6 million. Last month, he withdrew an appeal of his sentence.

His appeal had contended that the trial judge improperly excluded “the heart of Nacchio’s defense” -- the expert testimony of Daniel Fischel, a securities law specialist and former dean of the University of Chicago Law School.

Fischel was planning on rebutting the government’s contention that the undisclosed information, once it was released to the public, was responsible for a drop in the company’s stock price.

“As a result of bad lawyering, my client has a 70-month jail and nearly $70 million in fines,” said attorney Bruce Nagel of Nagel Rice in Roseland, New Jersey, who filed the complaint today. “He’s innocent, and he didn’t get his best shot with the lawyer he had.”

The case is Nacchio v. Stern & Kilcullen, Superior Court of New Jersey (Newark). The appeals case is U.S. v. Nacchio, 07-01311, 10th U.S. Circuit Court of Appeals (Denver). The trial court case is U.S. v. Nacchio, 05-00545, U.S. District Court, District of Colorado (Denver).

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net

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