Nacchio's got me, babe
By Al Lewis
Wednesday, December 19, 2007
The clock radio blares at 6 a.m. Sonny and Cher are singing "I've Got You Babe." I wake up,
horrified, and realize it's time to cover the insider-trading
trial of Joe Nacchio again.
I am stuck in a time loop, like Bill Murray in the 1993 film
I've been writing about Nacchio and the meltdown at Qwest for
nearly seven years. Enron, WorldCom and Tyco are fading
into the fog of history. But it look like I may be writing
about Qwest and Nacchio for years to come.
This is all I can think about after watching three appellate
judges handle Nacchio's insider-trading case Tuesday.
I know it's impossible to predict the outcome of an appellate
proceeding, but based on the kinds of questions the judges were
asking attorneys, it looks like this court is seriously
entertaining thoughts of overturning Nacchio's conviction on 19
counts of illegal insider trading.
Two of the three judges, Paul Kelly and Michael McConnell,
seemed concerned about the way U.S. District Judge Edward
Nottingham handled this case. Judge Jerome Holmes,
however, seemed to be leaning more toward upholding the verdict.
My best guess is that they will overturn Nacchio's conviction
2-1, with Holmes dissenting.
Back to district court?
I'm also guessing they won't go quite so far as to dismiss
the case altogether. That would be too clean a finale and
too convenient for a writer like me.
Instead, they will send the case back to the district court for
retrial. And with my luck, Nacchio will win a change of
venue too. So there I will be, writing about it, again,
from some far-flung place like Pennsylvania on Groundhog Day.
I say this because the appellate judges, in their questions,
were much harder on the government's attorney, Stephen
Oestreicher, than they were on Nacchio's attorney, Maureen
Or maybe I am reading this the wrong way. Maybe they've
already decided to uphold the government's case but just wanted
to make a nice little show of grilling the prosecution first.
The more likely possibility, though, is that they have genuine
Mahoney has argued that Nottingham improperly excluded expert
witness testimony from Daniel Fischel, a
University law professor
with a long history of testifying in white-collar cases.
Fischel would have told the court that Qwest's implosion was due
to broader risks to the
economy that the investing public already knew. He also
would have given the jury guidance on the "materially," or
relevance, of information Nacchio allegedly used in making his
stock trades, Mahoney said.
The prosecution has argued that Nacchio deceived the investing
public with unrealistic projections. During the trading
period for which Nacchio was prosecuted, Qwest missed revenue
projections by somewhere between $300 million and $900 million,
a fraction of its more that $21 billion in annual revenues.
So was that the "material" information Nacchio held? That
he might be off a few percent in his revenue predictions?
Should every stock-trading executive who misses projections be
"Materiality as low as that effectively makes it impossible for
any corporate insider to sell stock," McConnell said.
And now I can't get that song out of my head:
Cher: "They say our love won't pay the
rent; before it's earned, our money's all been spent."
Sonny: "I guess that's so, we don't have a pot; but
at least I'm sure of all the things we got. ... Babe."
Both: "O got you, babe; I got you, babe."
I asked First Assistant U.S. Attorney Cliff Stricklin, who
successfully prosecuted Nacchio, if he's ever had to try the
same case twice.
"Yes," he said, confident as ever.
How did it come out?
"It was a bad deal for the defendant," he said.
Meantime, in a state district courtroom across town, another
white-collar defendant whom I've written about was being
sentenced on fraud charges.
Bert Bassford got 12 years for bilking Dealin' Doug
Moreland, Big Mike Naughton and some other car dealers through
his bogus company, Autobucks.com.
Prosecutor Joe Morales asked Denver Post reporter Felisa Cardona
why I was not there for this grand finale.
"He's at Nacchio," she explained.
"Nacchio?" Morales asked. "My guy got more time than
And that case had a nice ending too.
Al Lewis' column regularly appears Sundays, Tuesdays and
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