Full court upholds Nacchio insider trading
By Andy Vuong
Updated: 02/25/2009 12:21:32 PM MST
A federal appeals court in
today upheld Joe Nacchio's criminal insider trading conviction,
overturning an initial three-judge panel's decision to grant the
former Qwest chief executive a new trial.
The initial panel had ruled that the trial judge hindered
Nacchio's right to a fair trial in excluding expert testimony
from business-law professor and private consultant Daniel
Fischel, one of the three witnesses Nacchio called in his
defense against 42 counts of insider trading charges.
In a 5 to 4 vote, the full court disagreed.
"The district court's exclusion of the testimony was not
arbitrary, capricious, whimsical, or manifestly unreasonable;
nor are we convinced that the district court made a clear error
or exceeded the bounds
of permissible choice in the circumstances," the majority
decision states. In addition to affirming the conviction, the
full court revoked Nacchio's bond and sent the case back to the
initial panel to review sentencing and forfeiture issues.
Nacchio, 59, has remained free on $2 million bond throughout the
proceedings and is expected to petition for the Supreme Court to
hear the case. He faces six years in prison for his conviction
on 19 counts of insider trading. He was also ordered to forfeit
$52 million in ill-gotten gains and pay $19 million in fines.
His attorneys, Maureen Mahoney and Herb Stern, couldn't
immediately be reached for comment.
"Today's 10th Circuit Court of Appeals opinion reaffirms what
the government has believed from the beginning, that the jury
verdict finding Mr. Nacchio guilty was indeed correct," said
Acting U.S. Attorney David Gaouette in a prepared statement.
Nacchio's attorneys argued during his appeal that the trial
judge didn't hold a separate hearing or solicit additional
information, as he should have, so they could explain why
Fischel's testimony should have been allowed.
Fischel was the "heart" of Nacchio's defense because he would
have testified, among other things, that the stock sales for
which Nacchio was convicted "were consistent with his previously
announced plan and did not accelerate in 2001 as the government
alleged," the defense has stated in court filings. The
government contended that the trial judge provided Nacchio
enough time - until well into the government's case during trial
- to explain why Fischel should be allowed to testify as an
expert, but the defense didn't meet the burden required under
the federal rules of evidence.
Those rules state that to offer expert or opinion testimony, the
defense must establish that the testimony is based on sufficient
facts or data and derived by using "reliable principles and
The government also argued that Nacchio did not "identify any
dispute that would warrant a hearing, and did not even request
such a hearing."
Nacchio was indicted on 42 counts of illegal insider trading in
December 2005, accused of accelerating his sale of company stock
in 2001 when he had nonpublic information that Qwest's financial
condition was deteriorating.
Nacchio was convicted on 19 counts in 2007 and sentenced to six
years in prison. In March, a three-judge appeals panel awarded
Nacchio a new trial, ruling 2-1 that District Court trial judge
Edward Nottingham erred by not allowing expert testimony Fischel.
In July, the full appellate court granted the government's
request to rehear the case.
Vuong: 303-954-1209 or