It's second round for Nacchio
The defense team for the former Qwest chief executive is
expected to zero in on jury instructions.
By Andy Vuong
Tuesday, December 18, 2007
Article Last Updated: 12/18/2007 12:24:23 AM MST
On many fronts, Joe Nacchio's appeal of his
criminal-insider-trading conviction is unusual.
A three-judge appellate panel granted the former Qwest chief
executive's bond request and put his case on expedited review.
The same panel will hear the appeal.
All are uncommon.
Oral arguments in Nacchio's case are set for this afternoon, and
it's the only case on the court's calendar, also a rare
occurrence. An appellate panel usually hears five or six
But one area where Nacchio's case doesn't differ from other
criminal appeals is what experts say will be his strongest
argument for overturning the conviction — flawed jury
"That's the most common area for a verdict to be overturned in a
criminal case because if there's a legal error, that's where it
creeps in," said Peter Henning, a professor at
Wayne State University
After reviewing Nacchio's appellate brief, Henning said the most
compelling argument relates to jury instructions on the
materiality or significance of information Nacchio had and
"If he's going to win, I believe it will be on the materiality
argument," Henning said.
The odds, however, are stacked against reversal. Only 3.9
percent of the criminal judgments reviewed by the 10th Circuit
in fiscal 2006 were reversed, according to Federal Judiciary
Nacchio appellate attorney Maureen Mahoney said presiding Judge
Edward Nottingham should have told the jury that Nacchio's
financial forecasts to the public were not misleading if he had
a reasonable assumption they would hold true.
Mahoney also contends that Nottingham
should have instructed the jury that the government had to prove
that Qwest was required to disclose key financial information
Nacchio received from his lieutenants.
"That error devastated Nacchio's defense, because it led the
jury to believe that the same information the company was
disregarding for disclosure purposes could nonetheless be
'material' for purposes of his trading," Mahoney said.
Illegal insider trading is defined as buying or selling stock on
the basis of material, nonpublic information.
The government's case hinged on the fact that Nacchio continued
to reassure investors about Qwest's upbeat financial forecasts
for 2000 and 2001 while he received repeated warnings from his
lieutenants that the company was headed for a fall.
At the same time, Nacchio accelerated his sale of company stock
and was convicted on 19 counts of illegal insider trading
connected to $52 million in sales in April and May 2001.
He was acquitted on 23 other insider-trading charges connected
to earlier sales. He was sentenced to six years in prison
and remains free on $2 million bond.
Along with other points, Mahoney has challenged
Nottingham's refusal to allow a defense witness to
testify about materiality and rulings connected to Nacchio's
Nacchio is not required to attend today's hearing , but experts
expect him to show up.
Mimi Hull, president of the Association of U S West Retirees,
said she'll be there.
"There is an interest in seeing Mr. Nacchio brought to justice
among the retirees," she said.
The three-judge panel does not have a deadline for a decision.
"I suspect they will get a decision out fairly quickly, but I
wouldn't necessarily expect it by the end of the year," said
Blain Myhre, a Denver appellate lawyer
for Isaacson Rosenbaum. "It could be a couple months or
Andy Vuong: 303-954-1209 or
The case for appeal
argue today in Joe Nacchio's case:
Insufficient evidence to convict:
Nacchio was bullish on Qwest and told the public six months in
advance that he had to exercise and sell his expiring stock
Flawed jury instructions: There were errors with
what jurors were told about the materiality of certain
information and good faith.
Wrongful exclusion of expert testimony: Nacchio's
expert witness, professor Daniel Fischel, should have been
allowed to testify about materiality to rebut similar testimony
from two government witnesses.
Unfair rulings related to his classified-information
defense: Nacchio contended he was upbeat about Qwest
because he had top-secret information that the company would
receive lucrative government contracts.
How we got here
Key dates in Joe Nacchio's journey from Qwest Communications
chief executive to convicted felon:
January 1997: Nacchio named Qwest CEO.
June 1999: Qwest makes hostile takeover bid for U S
June 2000: Qwest, U S West complete $50 billion merger.
October 2000: Accounting company Arthur Andersen
tells Qwest the way it books fiber-optic capacity sales is
high-risk and that it faces a possible challenge from federal
March 11, 2002: Qwest announces that the Securities
and Exchange Commission has opened an informal inquiry into its
April 2002: SEC makes its investigation formal.
June 16, 2002: Nacchio is forced to resign.
July 10, 2002: Qwest confirms that the U.S. Justice
Department is investigating possible criminal activities.
November 2003: Qwest completes a re-audit of its
books for 2000-02, wiping out $2.5 billion in improperly logged
March 15, 2005: SEC sues 12 former Qwest
executives, including Nacchio, for allegedly inflating the
company's financial performance and misleading investors.
Dec. 20, 2005: Nacchio is charged with illegal
insider trading in the sales of $100.8 million in stock from
January to May 2001.
March 19: Nacchio's trial on
illegal-insider-trading charges begins in U.S. District Court in
April 19: Nacchio is found guilty of 19 of 42 counts,
July 27: Nacchio is sentenced to six years in
Aug. 22: Appellate panel grants Nacchio bail
Today: Oral arguments will be heard in his appeal.
The basics NACCHIO: Jury direction at issue
Today: Oral arguments in Joe Nacchio's criminal
Time: 2 p.m. Courtroom opens at 1 p.m.
Public seating on first-come, first-served basis.
White U.S. Court House, Courtroom 1, 1823 Stout St.
Arguing for the defense: Maureen Mahoney, head of
appellate and constitutional practice groups for Latham &
Watkins. Mahoney represented now-defunct accounting firm Arthur
Andersen in its appeal of an obstruction-of- justice conviction,
which the Supreme Court overturned in 2005.
Arguing for the government: Stephan Oestreicher,
Criminal Division, Appellate Section of the Department of
Justice. Oestreicher worked on the detention case of
"dirty bomb" terrorist suspect Jose Padilla.
Hearing the case: 10th Circuit Judges Paul Kelly
(presiding), Michael McConnell and Jerome Holmes.