Day 3: Direct of Wolfe wraps up, cross has an exciting start

The direct examination of Lee Wolfe wrapped up this afternoon. The testimony focused mostly on Nacchio’s credibility with investors and analysts, punctuated by Wolfe relating conversations where he discussed the disclosure of “one-timers” (mostly IRUs or the sale of portions of the Qwest capacity) to which Nacchio typically asked: “Can you guarantee me that the stock price won’t go down?” When the extent of the one-timers was finally disclosed and share prices fell, Wolfe quoted Nacchio as saying, “See, this is what happens when you disclose.”

Cross was conducted by John Richilano. Things got off to a hot start, with Richilano accusing Wolfe of answering questions that had not been asked. Judge Nottingham took exception to this, saying, “Don’t start arguing with this witness right off the bat.” The questions themselves opened with a bang as well, as Richilano began eliciting details of Wolfe’s dealings with federal investigators, including those from the SEC and the FBI. Noted points included:

• Wolfe didn’t only sell stock in 2001. In 2000, Wolfe sold Qwest shares, netting him around $1,000,000.

• Wolfe has not been charged by the SEC or otherwise required to disgorge his trading profits. As for his motive in testifying, Wolfe acknowledged that it was mixed, involving both a fear of criminal liability and his “crisis of conscience.”

• Nacchio was not actually present at many meetings with investors, contrary to impressions that may have been left by Wolfe. Wolfe did, however, reaffirm that Nacchio was present at all conference calls.

• Richilano spent a great deal of time using Qwest SEC filings to illustrate that earnings projections are subject to an inherent degree of uncertainty, especially in the context of a growth company like Qwest.

• Richilano also seemed to be attempting to show that Wolfe’s 33 years of experience at AT&T, a large and already established company, did not prepare him for the entrepreneurial environment at Qwest.

Proceedings will resume at 8:45 tomorrow morning; check back for continuing coverage.