The Association of U S West Retirees



Second look at bid for new Nacchio trial
Full appeals court to decide whether conviction stands
By Sara Burnett and Jeff Smith
Thursday, July 31, 2008

The Department of Justice scored a victory Wednesday in its ongoing case against Joe Nacchio, as the full 10th Circuit Court of Appeals agreed to consider whether the former Qwest CEO's conviction should stand.

Prosecutors asked the full panel to hear the case after a three-judge panel ruled earlier this year that the conviction should be thrown out and a new trial held.

The court, which grants only a handful of such requests each year, set oral arguments for Sept. 24.

"It certainly suggests that this was a good day for the government," said Rick Kornfeld, a Denver attorney and former federal prosecutor.

U.S. Attorney for Colorado Troy Eid said he wasn't surprised by Wednesday's decision or the earlier ruling.  "We respect the appellate process and will keep working to ensure that justice is done," he said.

Nacchio's attorney, meanwhile, was confident the full panel would agree that key evidence was improperly excluded at trial.

"The (three-judge) panel concluded that the trial was unfair, and we expect the (full) court to agree," said Maureen Mahoney.

A federal jury found Nacchio guilty in April 2007 of 19 counts of insider trading.  He was sentenced to six years in prison, fined $19 million and ordered to forfeit $52 million of stock proceeds.

A three-judge 10th Circuit panel, however, ruled that Nacchio could remain free on $2 million bail pending his appeal.

That same panel ruled 2-1 in March that U.S. District Judge Edward Nottingham erred when he refused to let a defense expert testify at Nacchio's trial.  The government then asked the full 10th Circuit to hear the case.

Nacchio's attorneys argued against a full-panel review and said that if the court granted the request, it should consider the entire case, including whether the evidence presented at trial was enough to convict.

The court's order issued Wednesday indicated it would focus only on the expert, law professor Daniel Fischel.

Fischel would have testified that the information prosecutors alleged Nacchio should have disclosed before selling stock wasn't "material," or that once it was disclosed, it did not significantly affect the stock price.

His testimony would have gone "to the heart of the case," Mahoney said last year.

But Nottingham prevented the testimony because he said the defense hadn't provided the methodology for Fischel's findings, as required.

Questions for both sides

The three-judge panel concluded that Nottingham should have held a hearing on the issue rather than simply exclude Fischel.  Prosecutors argued that Nacchio never requested such a hearing.

The full 10th Circuit now wants each side to address four questions:

* Did the defense have sufficient notice that it was required to present the methodology or request a hearing?

* Did Nacchio have adequate opportunity to present the methodology or request a hearing?

* Was the burden to request a hearing Nacchio's?

* Did Nottingham abuse his discretion and, if so, would a new trial be the appropriate remedy or could a new evidentiary hearing be held?

Kornfeld said a new hearing would be "pretty unusual and very difficult," particularly if held before a new judge.

Denver defense attorney Jeralyn Merritt agreed.

"That's kind of like trying to put the toothpaste back into the tube," he said.  "I think that's the most unlikely and messiest scenario."

The 10th Circuit has 12 active judges.  Three judges chose not to participate, however, leaving nine -- including the three from the earlier panel -- to decide the case.

Prosecutors argued at trial that Nacchio knew when he sold stock in early 2001 that the company was relying too heavily on unsustainable, one-time sales of space on its fiber-optic network.  He should have shared that information with investors before he sold his own shares, they said.

Nacchio's defense said the CEO believed in the company and was selling stock only because he had options that were set to expire.

The jury acquitted Nacchio on 23 counts for his sales during the first three months of 2001.  They returned a guilty verdict on 19 counts for sales in April and May. or 303-954-5343

What's next

* Within 30 days, each side must submit legal briefs on the issue being considered - whether a defense expert was improperly prohibited from testifying.

* Fifteen days later, each side may respond to the other's brief.

* Oral arguments will be heard Sept. 24 at 2 p.m.

* The court may issue its ruling at any time.