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Milstead: Jury isn't hearing sham allegations

Published March 28, 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:

Greg Casey's testimony Tuesday provided a change of pace from the time spent with former CFO Robin Szeliga on the stand.

Perhaps it's because Casey is a lawyer and can parse the questions better. Or because he testified less about numbers and budgets and more about the warnings he gave Joe Nacchio.

Ultimately, Casey provided easy-to-understand testimony that he warned Nacchio that sales of network capacity to other telcos were drying up in 2001.

It was Casey's business unit that generated most of the one-time revenue and profit, through "IRUs," that helped Qwest hit its numbers.

Yet, as the two previous financial executives testified, Wall Street never knew about this.

Casey was not an ideal witness. The SEC sued him for civil fraud, and he turned over just $2.1 million of the approximately $35 million he made at Qwest.

He testified Tuesday he believed he'd done nothing wrong and that there's nothing wrong with the "swaps" that the SEC has alleged are a sham.

But the jury isn't hearing anything about the sham allegations or how Qwest ultimately restated $2.5 billion.

Prosecutor Colleen Conry tried to ask a restatement question during the Szeliga cross-examination, but Judge Edward Nottingham sustained an objection.

Why? Perhaps because Nacchio isn't charged with fraudulent accounting, so it would be prejudicial. Or because the restatement occurred outside the time frame of the indictment.

The effect of this ruling: Nacchio's legal squad can continue to keep asking questions about how Qwest hit its earnings targets 17 quarters in a row, without admitting the underlying fiction.

In the end, this might help get a "not guilty" verdict for Nacchio.

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

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