U.S. Securities and Exchange Commission
Litigation Release No. 21825 / January 25, 2011
Securities and Exchange Commission v. Joseph P. Nacchio, et al, Civ. No. 05-cv-480-MSK-CBS (D. Colorado)
COURT ENTERS FINAL JUDGMENT AGAINST FORMER CEO OF QWEST COMMUNICATIONS INT'L JOSEPH P. NACCHIO
The U.S. Securities and Exchange Commission announced today that the United States District Court for the District of Colorado entered a Final Judgment dated January 24, 2011, in a civil action against Joseph P. Nacchio, the former chief executive officer of Qwest Communications International Inc., a Denver-based telecommunications company. Nacchio, without admitting or denying the Commission's allegations, consented to the entry of a Final Judgment that enjoins him from violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and from aiding and abetting violations of Sections 13(a) and 13(b)(2) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder; finds that he is liable for disgorgement of $44,632,464, plus interest, which will be deemed satisfied by Nacchio's forfeiture of that amount in the related criminal case, United States v. Nacchio, 05-cr-00545 (D. Colorado); and prohibits him from acting as an officer or director of a public company. A civil penalty was not imposed against Nacchio by agreement of the parties in light of the criminal sanctions ordered in the related criminal case and because Nacchio agreed to waive all rights to appeal a criminal fine of $19 million imposed upon him in the related criminal case. It is anticipated that the Commission will ask the Court to add the disgorgement ordered against Nacchio of $44,632,464, plus interest, to a Fair Fund which was established in SEC v. Qwest Communications, Inc., Civ No. 04-cv-1267 (D. Colorado), through which the Commission thus far has marshaled and distributed approximately $275 million to harmed investors.
According to the SEC's complaint in this matter, from at least April 1, 1999 through March 31, 2002, Nacchio and others at Qwest engaged in a large-scale financial fraud that hid from the investing public the true source and nature of the company's revenue and earnings growth. The complaint alleged that, although Qwest publicly touted its purported growth in services contracts which would provide a continuing revenue stream, in fact the company fraudulently and repeatedly relied on revenue recognition from one-time sales of assets known as "IRUs" and certain equipment without making required disclosures. The complaint also alleged that Nacchio and others fraudulently and materially misrepresented Qwest's performance and growth to the investing public. The complaint further alleged that Nacchio sold Qwest stock in violation of the insider trading prohibition of the securities laws.
The litigation against the remaining four defendants named in the Commission's complaint is continuing.