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Milstead: Prosecution lays factual foundation

Published March 23, 2007 at midnight

Rocky finance editor David Milstead is weighing in each day on his "Out of Order" blog at RockyMountainNews.com. Here's an excerpt:

With five different witnesses taking the stand Thursday, each side had opportunities to score points.

But after the testimony of former investor relations head Lee Wolfe concluded, the prosecution didn't call witnesses who accused Joe Nacchio directly. For the most part, they were there to lay factual foundations or provide direct evidence of routine matters.

Take Nicole Bonsness, who was the administrator of Qwest's stock plans. Prosecutor Colleen Conry politely and efficiently guided her through an explanation of how a Qwest employee used a stock option and sold the shares. One of the main points seemed to be to show Nacchio's signature on a stock-sale order.

Anschutz Co. executive and former Qwest board member Craig Slater was a witness for the prosecution mainly to explain that Qwest's board preferred Nacchio sell stock in an orderly manner and did not force him to sell.

But Slater also provided defense attorney Herbert Stern with a wide opening to introduce testimony that Qwest had to persuade Nacchio to become CEO, gave him compensation pegged to growing the company and believed he was the best person to build it into a major enterprise.

That message got through despite Judge Edward Nottingham's blowup at Stern for argumentative questioning and periodic problems with evidence and organization. Stern indeed futzed around, largely because a couple of lines of his questioning seemed to be cut off by prosecutors' objections. Stern didn't seem to be attempting to evoke sympathy by inviting Nottingham's wrath.

Sally Anderson, a former U S West employee, could have been a superstar witness for the prosecution. But it became clear that Nottingham was prohibiting testimony on how much money she lost. If the pattern continues, no "victims" of Qwest's crash will be allowed to testify of their losses.

But even without that key fact, Anderson was helpful. Defense attorney Marci Gilligan was sharp and smooth in her questioning - so much so that Anderson seemed to have no clue what was being asked of her, thereby illustrating she was a hapless investor who would indeed buy Qwest stock primarily on the basis of Nacchio's buoyant statements.

As the prosecution continues next week, its challenge is to prove sophisticated investors were misled as well.

Comment on David Milstead's blog at RockyMountainNews.com.

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