Nacchio's jail time could be cut
An appellate panel finds that the trial judge erred in
calculating his sentence and forfeiture.
By Andy Vuong and Sara Castellanos
Saturday, Aigist 1, 2009
A federal judge miscalculated when he sentenced Joe Nacchio
to a six-year prison term for illegal insider trading and
ordered the former Qwest chief executive to forfeit $52 million,
a three-judge appeals-court panel ruled Friday in reversing his
The unanimous decision by the 10th U.S. Circuit Court of Appeals
panel remanding the sentencing portion of the case to U.S.
District Court means Nacchio's term could be shortened by as
much as 2 1/2 years and his forfeiture dropped by millions.
The Justice Department is reviewing the order, said spokeswoman
The government has 14 days to ask the panel to reconsider or
request a rehearing from the entire 10th Circuit, or both.
It also can appeal the panel's decision to the Supreme Court.
Qwest retiree Nelson Phelps said the panel's ruling was an
"The original sentence he got we thought was light," Phelps
said. "I'm sick to my stomach."
Nacchio's attorney, Maureen Mahoney, didn't respond to a request
Nacchio, 60, was convicted in 2007 on charges that he illegal
sold $52 million in Qwest stock based on insider information.
He began serving a 72-month sentence in April at a federal
prison camp in Pennsylvania.
Nacchio had argued on appeal that his sentence should range from
41 months to 51 months — not the 72-month term that the trial
judge, Edward Nottingham, gave him — because his actual gain
from having the insider information was $1.8 million.
Nottingham based his decision on a $28 million
gain that Nacchio is alleged to have pocketed after fees, taxes
and other costs associated with exercising stock options.
"We disagree with the district court's analysis," Judge Jerome
Holmes wrote in the court's opinion. "An insider-trading
defendant's 'gain' should not consist of the total amount that
the defendant realized from his or her stock sales, but should
be limited more specifically to the gain that resulted from
trading with insider knowledge," Holmes wrote. The same
panel of judges — Holmes, Paul Kelly and Michael McConnell —
last year reversed Nacchio's conviction in a 2-1 ruling, with
Holmes the dissenter. The full 10th Circuit later vacated
that decision and reinstated the conviction.
"The appellate court probably has it right in that the
calculation may have been done improperly," said Carl Tobias, a
law professor at the University of Richmond
"I do think (the sentence is) going to be significantly
The appeals panel also ruled that the district court must
recalculate Nacchio's forfeiture amount.
Nottingham had ordered Nacchio to forfeit $52
million — the gross proceeds on the 19 illegal insider trades
before taxes, fees and other costs. Nacchio contended that
the amount should be no more than $44.6 million after factoring
in brokerage commissions and fees.
"Mr. Nacchio should be required to forfeit his net profit,
rather than the gross proceeds, of his insider-trading
offenses," the panel said.
U.S. District Judge Marcia Krieger now presides over the Nacchio
case after Nottingham resigned last year.
Nacchio has a motion for a new trial pending before Krieger,
contending that new evidence has surfaced. He also has
asked the Supreme Court to review the case.
Andy Vuong: 303-954-1209