Lawyers say there’s a big risk in putting the former Qwest CEO on the stand. Would his hot-tempered, arrogant side come out?
By Greg Griffin
The legal bills for ex-Qwest chief executive Joe Nacchio are estimated
to run as high as $75 million. (AP file)
Will Joe Nacchio testify?
And if he does, which Joe will prevail on the stand – the one who wooed Wall Street and others in 1999 and 2000 or the one who lashed out at critics in 2001?
Much will turn on the answers to these questions during the former Qwest chief executive’s criminal insider-trading trial, which begins March 19. Many people will be watching in Colorado and other states where Qwest operates.
“I would love to see him take the stand,” said Qwest employee Brent Pilloud, 52, of Aurora. “would like to see if the man has any hint of decency. If he’s willing to say ëYeah, took too much.”‘
Pilloud said he may try to take a day off work to watch Nacchio testify. has pleaded not guilty.
For Denver, which hasn’t seen a white-collar criminal trial of this scope since the Silverado savings-and-loan scandal of the late 1980s, Nacchio’s testimony could be riveting.
Nacchio was known as a hard-driving and hot-tempered chief executive who often used intimidation to get results. But he also was a smooth salesman for his vision of Qwest as a globally dominant telecommunications and technology company.
He orchestrated an audacious takeover of US West in 2000 but never won over many of the phone company’s workers. Some lost their jobs and others lost their savings as Qwest’s share price plummeted from more than $60 in 2000 to $1.11 in August 2002.
As his trial on 42 counts of insider trading approaches, no decision is bigger for the New York native and his lawyers than whether or not he takes the stand. Though Nacchio is undoubtedly preparing for his testimony, his lawyers may not make the call until late in the trial. They declined to comment for this story.
If Nacchio doesn’t testify, jurors may suspect he is hiding something. On the stand, however, could lose his composure or contradict himself under cross-examination.
“There’s brutal risk associated with taking the stand,” said former prosecutor Greg Goldberg, an attorney with Holland & Hart. “But you just know it’s in the back of the jurors’ minds … ëIf there was a rational explanation for this stuff, he would give it to us.”‘
The legal bills for ex-Qwest chief executive Joe Nacchio are estimated to run as high as $75 million.
The consensus among legal experts is that Nacchio is more likely than not to testify. The case centers on whether used inside information when he sold $100.8 million in Qwest shares in early 2001.
No one else may be able to explain his motivation for those sales.
Recent high-profile corporate-fraud cases give little guidance as to the right strategy.
Enron’s Ken Lay came across as arrogant and short-tempered on the stand, even snapping at his own attorney. He was convicted, and died before sentencing. Jeffrey Skilling kept his ego in check but stumbled on credibility issues during his Enron testimony, experts said. He, too, was convicted.
WorldCom’s Bernie Ebbers was found guilty after testifying that he didn’t understand accounting and was unaware that fraud was happening. HealthSouth’s Richard Scrushy did not testify, and he was acquitted in his first trial.
But Martha Stewart didn’t testify and a jury found her guilty, while former Qwest senior vice president John Walker was acquitted in 2004 after taking the stand.
Scrushy’s testimony was a matter of debate among his attorneys. Birmingham, Ala., lawyer Jim Parkman believed they had already won when the government rested its case.
“There was really nothing Richard could have added. Why put him up there and risk making a mistake?” Parkman said.
Scrushy wanted to testify but eventually agreed with Parkman.
The greatest risk for corporate executives on the stand is a display of arrogance, anger or lack of remorse, Parkman said. It’s rarely a problem under direct examination, but defendants can lose their composure under aggressive cross-examination by prosecutors.
“You never want someone with a big ego to show that,” Parkman said. “That sends a message to the jury, ëI don’t care what anyone else tells me, I’m going to do what want.”‘
Added Denver attorney Steve Peters, who represented John Walker: “It can be difficult to break an arrogant witness of his habits.”
Nacchio was prone to the occasional public display of anger or arrogance. After Morgan Stanley analysts began criticizing Qwest’s accounting and earnings projections in mid-2001, Nacchio responded angrily.
“Innuendos on our integrity are not going to be tolerated, including from what I used to consider a reputable firm like Morgan Stanley,” said during a conference call, calling the analysts’ criticisms “hogwash.”
He later added: “It is sad, the quality of analysis going on at that firm. … It’s very frustrating for us in the industry when we have analysts who can’t grasp these concepts.”
After the merger with US West, Nacchio upset workers by referring to them as clowns.
“Because you wear a clown suit doesn’t mean you work for the circus. We’ll take off the suits and get down to work, then we’ll send out the clowns,” he told The Street.com.
Behind closed doors, Nacchio was even more defiant, according to a transcript of an early 2002 meeting with top Qwest advisers.
“I’d like to get some of these (expletive) analysts and what they were writing 18 months ago, and ask them – if they’re full-time trying to analyze things – how come they got it so (expletive) wrong?” Nacchio said.
But Nacchio has a smoother side that was on display as he convinced investors, regulators and analysts to support Qwest’s bid for US West in 1999 and 2000.
“This company will be … like Qwest on steroids,” Nacchio told Colorado regulators in September 1999. “know there are service issues. know there also are issues about local competition. It’s our belief that Qwest’s merger with US West will improve both of these issues.”
A few months later, he told shareholders: “This company is about taking advantage of the enormous explosion of growth of the Internet. There aren’t going to be telephone companies in the next few years.”
In his eight-volume set of books, “Trying Cases to Win” Nacchio lead attorney Herbert Stern is mum on the issue of whether or not to put a defendant on the stand.
Perhaps that is because the book is based largely on his experiences as a federal prosecutor and judge in New Jersey.
But Stern has plenty of advice on how to prepare witnesses to testify. He rejects popular methods including practice testimony before a video camera or in a mock courtroom.
Stern said he asks practice questions of his witnesses in themes rather than in the order they will be asked during testimony, to avoid a wooden or scripted appearance.
“A witness who knows his facts, who understands their significance … who feels that he can defend the positions he will be taking in his testimony – such a witness is not only very well prepared; he is a working partner on the witness stand,” Stern wrote. “He can confidently follow your lead and moves, much like a dance partner.