I didn’t realize that it was pay-as-you go for federal jail time. An appeals court has ordered a new sentence for ex-Qwest CEO Joe Nacchio saying his six-year sentence was too long.
That sentence was based on an alleged profit of $28 million. Nacchio’s attorneys argued that the former CEO “is being punished for the price increase of Qwest stock from 1997.” They claim his profit would have only been $1.8 million which would have capped his sentence at four years, three months.
I’m not sure why but I find this line of reasoning offensive. I know that the legal system works this way – it isn’t “grand” theft, for example, until your stealing hits a certain monetary threshold. But it just seems wrong.
Nacchio sold a large part of his Qwest shares in April-May 2001 – trades worth almost $39 million. At that time Qwest was trading between $41.12 and $38.31.
Qwest stock then began a sharp decline (to say the least) in May 2001, falling from $38 to below $2 by August 2002. Nacchio resigned from Qwest in June 2002 amid the insider trading rumors
However, a three-judge panel at the 10th Circuit Court of Appeals in Denver agreed with Nacchio’s lawyers last Friday that the $52 million figure was too high. The Appeals Court wrote that Nacchio’s gain should have been calculated in a way that more accurately reflects “the proceeds related to his criminally culpable conduct.”
Nacchio’s sentencing calculations were based on net profit from his illegal insider trading. That means the amount ill-gotten gains after taxes, brokerage, commission fees and other direct costs of trading have been subtracted.
Prosecutors said Nacchio gained $44 million. The court for sentencing purposes took the prosecutors' figure and subtracted $16 million for taxes. Nacchio’s six-year sentence was therefore based on an alleged profit of $28 million and even that number turned out to be too high.
I’m sure Nacchio intended to make $52 million or more. The fact that he didn’t was a direct result of his own poor management. Bad judgment as a CEO resulted in less jail time because he didn’t profit from his illegal trades to the extent that he could have had Qwest been managed better.
I see. If you do some illegal trading it only counts if you make lots of money from it. The old saying is false, it’s not the principal of the thing. A white-collar crime is a white-collar crime unless it makes you lots and lots of dimes.
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