Former Qwest Communications executive Marc Weisberg pleaded guilty Wednesday to wire fraud and agreed to cooperate with federal prosecutors...
DENVER — Former Qwest Communications executive Marc Weisberg pleaded guilty Wednesday to wire fraud and agreed to cooperate with federal prosecutors trying to convict former Chief Executive Joseph Nacchio of illegally dumping more than $100 million in stock.
Weisberg, a former senior vice president who oversaw investments, mergers and acquisitions for Qwest, pleaded guilty to a single count of fraud. He had faced eight counts of wire fraud and three counts of money laundering.
The plea came a week after Nacchio was indicted on 42 counts of insider trading and on the same day that Enron’s former top accountant, Richard Causey, pleaded guilty to securities fraud and agreed to cooperate with prosecutors investigating the Houston company.
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“In today’s atmosphere, there is simply too great a risk that a jury may be persuaded to paint Mr. Weisberg with the broad brush of alleged impropriety at Qwest,” defense attorneys Stephen Peters and Gary Lozow said in a statement.
Prosecutors declined comment. They have said their investigation of Qwest is substantially complete with Nacchio’s indictment.
Weisberg, who is free on $1 million unsecured bond, faces a March 3 sentencing hearing.
Prosecutors have said Weisberg’s case was not directly connected to the accounting scandal that forced Qwest to restate billions in revenue. Instead, they accused Weisberg of improperly earning $2.9 million for himself, family members and friends from 1999 to 2001 by demanding that vendors offer them shares in other companies in return for doing business with Qwest, the telephone provider for 14 mostly Western states.
In a plea agreement filed with a federal judge, Weisberg admitted to buying stock in a California company in March 2000 and failing to report the deal to Qwest. He sold the stock in 2001 at a loss of about $529,000, the document said.
Prosecutors said they will seek 60 days of in-home detention, two years of probation and a $250,000 fine against Weisberg, 48. He had faced decades in prison, huge fines and forfeiture of $2.9 million if convicted of the original charges.
Weisberg joins former Qwest Chief Financial Officer Robin Szeliga as a potential witness in future cases. She pleaded guilty in July to one count of insider trading and agreed to cooperate with investigators. In addition, former Qwest President Afshin Mohebbi has been granted immunity and is expected to testify.
The plea deal could mean prosecutors are concerned about their case against Nacchio — or it could mean Weisberg can provide important testimony, said Jacob Frenkel, a former federal prosecutor and former lawyer for the Securities and Exchange Commission (SEC).
“The government would certainly love to be able to expand its indictment against Mr. Nacchio,” he said. “The government wants to have cooperating senior executives in the fold as cooperating witnesses because corporate fraud cases are difficult cases to prove and they almost always turn on the help of senior insiders. (Prosecutors) need to know who was saying what to whom.”
The charges against Nacchio and the deal with Weisberg come three years after the government trumpeted the first indictments in the Qwest investigation as an example of the crackdown on white-collar crime.
Nacchio is accused of illegally selling off $101 million in stock over five months in 2001 after learning the company might not meet its financial goals and keeping that information from stockholders.
The government has said Qwest and some of its former executives participated in a massive fraud between April 1999 and March 2002 by falsely reporting one-time sales or trades of capacity on its fiber-optic cables as recurring revenue.
The fraud allowed Qwest to improperly book approximately $3 billion in revenue that eased its 2000 merger with US West and helped various executives to reap millions in “ill-gotten” profits, the government has said. Qwest later restated earnings from 2000 and 2001 to erase about $2.2 billion in revenue.
Two former midlevel executives were acquitted of wire fraud and conspiracy charges in 2004. Two others later pleaded guilty to reduced charges and agreed to cooperate with investigators.
Last month, Qwest said it would pay $400 million to settle the claims of tens of thousands of shareholders who purchased Qwest securities. The company earlier agreed to pay $250 million to settle SEC charges of fraud without admitting wrongdoing.