Ex-Qwest Chief Executive Joseph Nacchio could get his six-year prison sentence and $52 million penalty for insider trading reduced, after an appeals court said on Friday he was improperly sentenced.
Nacchio, whose 2007 conviction on 19 counts of insider trading was hailed as a victory over greedy corporate chieftains, was incorrectly sentenced because the trial court had wrongly calculated his illegal stock market gains, according to an appeals court opinion filed on Friday.
Nacchio, who turned 60 in prison in June, was accused of illegally selling his Qwest stock in 2001 after company executives warned him that Qwest could not meet its financial targets.
On Friday, the 10th U.S. Circuit Court of Appeals ruled that the trial court had erred in ordering Nacchio to forfeit $52 million in gross proceeds from illegal stock sales and in calculating his prison term based on an incorrect profit.
The appeals court did not specify a new sentence length for Nacchio, but instructed the sentencing court to subtract the underlying value of his Qwest shares in calculating the illegal profit and sentence.
Mr. Nacchio's increased prison sentence should be linked to the gain actually resulting from the offense, not to gain attributable to legitimate price appreciation and the underlying inherent value of the Qwest shares, the court said.
U.S. Department of Justice spokeswoman Laura Sweeney said the agency was reviewing the court's decision.
Nacchio's attorney, Maureen Mahoney, did not respond to requests for comment.
FADED STAR ARGUES FOR FAIRNESS
Nacchio began serving his sentence in April at a federal prison camp in Pennsylvania and is awaiting a decision from the U.S. Supreme Court on whether it will accept his appeal, which claims he did not receive a fair trial.
Once a star on Wall Street, Nacchio became one of several corporate leaders convicted of financial crimes, including Tyco International's Dennis Kozlowski, WorldCom's Bernard Ebbers and ImClone Systems' Sam Waksal.
At his trial, Nacchio's lawyers argued that his sentence should fall within federal sentencing guidelines of 41 to 51 months, based on insider trading profits of $1.8 million.
But prosecutors argued that Nacchio's illegal proceeds from the Qwest stock were at least $44.6 million, resulting in a sentencing range of 70 to 87 months.
The trial court rejected both arguments and calculated the sentence based on a $28 million gain and imposed a sentence of 72 months to run concurrently for each count.
But on Friday, the appeals court found that the trial judge had incorrectly calculated Nacchio's true gain.
(Reporting by Robert Boczkiewicz in Denver; Gina Keating in Los Angeles)