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Full court upholds Nacchio insider trading conviction
By Andy Vuong
Denver Post
Updated: 02/25/2009 12:21:32 PM MST

A federal appeals court in Denver 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 of judgment
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 methods."

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.

Andy Vuong: 303-954-1209 or