Ex-CEO at Qwest to get new trial
A federal appeals court ordered a new trial Monday for former Qwest Chief Executive Joe Nacchio, saying the trial judge wrongly excluded expert testimony important to Nacchio’s defense in his insider trading case.
The court also ordered a new judge to hear Nacchio’s case.
Nacchio was convicted in April 2007 on 19 counts involving the sale of $52 million worth of Qwest stock in 2001. He was sentenced to six years in prison but remained free on appeal. Jurors acquitted Nacchio of 23 counts.
Prosecutors argued Nacchio sold the stock when he knew Denver-based Qwest Communications International Inc. was at risk but didn’t tell investors. U.S. Atty. Troy Eid had called the case the largest insider trading prosecution in the nation based on the number of counts, the amount of money involved and the length of the prison term.
“This is a setback, not a defeat,” Eid said Monday. “The good news is the circuit court said our trial team presented sufficient evidence to convict Mr. Nacchio of insider trading.”
Nacchio attorney Maureen Mahoney couldn’t immediately be reached for comment.
Attorneys for Nacchio told the U.S. 10th Circuit Court of Appeals in December that the case against him didn’t meet standards set by previous court rulings. Mahoney also told the court that U.S. District Judge Edward Nottingham wrongly prevented defense witness Daniel Fischel from testifying.
The appeals court rejected Mahoney’s argument that Nottingham’s instructions to the jury were inadequate. It also rejected an argument that the government failed to introduce sufficient evidence to convict Nacchio, which if true would have meant Nacchio could not have been retried under the double jeopardy clause.
At the appeals hearing, the judges repeatedly asked government prosecutor Stephan E. Oestreicher Jr. why Nottingham kept Fischel from testifying.
Nacchio’s attorneys say Fischel, an expert on corporate law and markets, was a core part of his defense and could have explained to jurors what must be publicly disclosed and that Nacchio’s stock sales were to diversify his portfolio. Mahoney said a reasonable jury hearing testimony from Fischel would have acquitted Nacchio.
Prosecutors say the defense didn’t establish the reliability of Fischel’s opinions or disclose how he arrived at them.
The three-judge appeals panel focused on how Nottingham simply announced his decision to forbid Fischel from testifying after accepting written arguments from both sides. Two members of the panel noted how Nottingham silenced a defense attorney who asked to speak, saying he had already ruled because the defense didn’t disclose Fischel’s methodology.
Nottingham said he feared that the expert testimony would invite the jurors to “abandon their own common sense and common experience and succumb to this expert’s credentials.”
Two members of the appeals panel wrote, “When the court does not allow a lawyer to present arguments, we will not penalize him for failing to present them.”
The third member, Judge Jerome Holmes, said the majority opinion “elevates form over substance” and said Nottingham was correct to exclude Fischel.
Nacchio maintained he was optimistic about Qwest’s future because he knew of potential contracts the company could land from secret government agencies. He did not present that argument during his trial.
