Joseph Nacchio, former chief executive officer of Qwest Communications International Inc., got a written warning in early 2001 that the company faced "big problems" in meeting revenue targets, court documents show.

The memo by former president Afshin Mohebbi was unsealed Monday in federal court in Denver, where Nacchio was indicted Dec. 20 on charges of selling $101 million in Qwest stock in 2001 while knowing revenue targets were inflated. Mohebbi wrote that Qwest needed $580 million in non-recurring revenue to meet total projections of $5.1 billion for the first quarter of 2001.

That non-recurring revenue projection was a "huge number," Mohebbi wrote to Nacchio. "It's doable but if we don't crank up recurring growth by April, we got big problems."

Prosecutors cited the memo in support of their claim that Nacchio knew Qwest struggled to hit revenue targets when he sold shares. Nacchio, 56, denies he sold his shares based on inside information not available to investors. Nacchio was CEO at Qwest, the No. 4 U.S. local telephone company, from 1997 to June 2002.

The memo was attached to a prosecution motion arguing that Nacchio does not deserve to introduce evidence at trial about Qwest's secret government contracts. Prosecutors filed the motion under the Classified Information Procedures Act, which governs use of classified data at trials.

Defense attorney Herbert Stern said in a filing unsealed Monday that Nacchio "was aware not just of secret government contracts that had already been awarded to Qwest, but also of well-formed plans for the government's future business dealings with the company."

Stern's argument came in response to a filing by U.S. Attorney William Leone this month that said Qwest's revenue from all federal contracts was $200 million in 2000 and $322 million in 2001, or 1.5 percent of total revenue. Classified contracts accounted for "only a small subset" of all federal contracts, he wrote.

"Even if Qwest had material federal classified contract prospects that might offset the pervasive weakness in its commercial business, the defendant would still be under a duty to disclose or abstain and would be guilty of the crime of insider trading," the prosecutor wrote.

"There was no increase in federal or classified work right around the corner," Leone wrote. "Qwest's federal revenue and its classified revenue actually declined in 2002."

Leone wrote that Qwest took into consideration the government contracts, including the classified ones, in its revenue projections. He said that jurors do not need to know about specific contracts.

"The identity of the agencies with which Qwest does business, the nature of the work done, and obviously, the nature of the work done by those agencies is extremely sensitive national security information," the prosecutor wrote. "That information should not be injected into this case lightly or without substantial justification."

Stern, a former federal judge who began his defense of Nacchio two months ago, said "the true essence" of the government's case was that Qwest's publicly announced financial figures were "deliberately false." Nacchio was only charged with insider trading, not certifying false financial statements.

"In order to defend himself, Mr. Nacchio will have to demonstrate that the public financial information was accurate," Stern wrote.

U.S. District Judge Edward Nottingham said at a hearing on Jan. 20 that the case could go to trial by the end of the year.