Nacchio guilty verdict to stand
Judges more hostile to ex-Qwest CEO's attorney
Rocky Mountain News
By Sara Burnett and
Friday, September 26, 2008
Legal experts walked out of Joe Nacchio's appellate court
hearing Thursday with a nearly unanimous prediction: an
initial guilty verdict for the former Qwest CEO's insider
trading trial will be reinstated.
There's no way to know how the court will rule, and some
cautioned against guessing. But the nine judges who heard
the case were clearly more hostile toward Nacchio's attorney.
Nacchio was convicted last year on 19 counts of insider trading
for selling $52 million in Qwest stock in 2001.
A three-judge panel of the 10th Circuit Court of Appeals earlier
this year reversed the conviction, sending the case back for a
new trial. The government then asked the full court to
consider the case.
It agreed, holding oral arguments in
Standing before nine of the court's 12 full-time judges, Nacchio
lawyer Maureen Mahoney could barely finish a sentence without a
judge cutting in with a question.
Two judges said they were "perplexed" by her argument.
"I don't think it's a good day for Joe Nacchio," said Rick
Kornfeld, a Denver
attorney and former federal prosecutor who attended the hearing.
John Holcomb, professor of business ethics and legal studies at
the University of Denver's Daniels School of Business, said
Mahoney appeared to be "groping" for answers.
"There were judges there, especially at the end, who really had
Mahoney bailing water," he said.
Nacchio didn't attend, and neither his lawyers nor attorneys for
the government commented afterward. But one of Nacchio's
former attorneys said the proceeding did not go well.
Nacchio was indicted on 42 counts of insider trading in 2005.
Prosecutors said Nacchio knew when he sold about $100 million in
stock that Qwest was in financial trouble, but didn't disclose
that information to investors.
In April 2007 a federal jury acquitted Nacchio on 23 counts but
convicted him on 19 counts.
U.S. District Judge Edward Nottingham later sentenced Nacchio to
six years in prison and ordered him to forfeit $52 million and
pay $19 million in fines.
A three-judge panel of the 10th Circuit Court of Appeals said
Nacchio could remain free on bail pending his appeal.
The same three-judge panel ruled 2-1 that Nacchio should get a
new trial because Nottingham
improperly excluded testimony from a key defense witness,
economist Daniel Fischel.
The full 10th Circuit then granted the government's request to
reconsider the ruling.
Mahoney told judges Thursday that Nacchio's lawyers were
"surprised" when Nottingham
said Fischel could not present expert testimony.
Fischel would have told jurors that the information Nacchio had
when he sold stock was not "material," or wouldn't have
significantly affected the stock price, and therefore didn't
need to be disclosed. That opinion went to the heart of
the defense, Mahoney has said.
Nacchio's team wanted to put Fischel on the stand to establish
the reliability of his opinions, Mahoney told the judges.
But when they tried to do so, Nottingham cut them off, saying any argument could have
been put in writing.
Prosecutors have argued that Nacchio's lawyers had ample
opportunity, and fair warning, that they needed to provide more
information about Fischel's findings before he would be allowed
to share them with the jury.
They said lawyers could have provided the methodology in writing
before or during the trial, or requested a hearing on the issue.
Judge Jerome Holmes, who dissented in the earlier ruling, seemed
to agree Thursday, telling Mahoney that "the obligation is upon
the person who wants to get that witness in."
But Deputy Solicitor General Edwin Kneedler, arguing for the
government, didn't escape the proceeding unscathed.
Judges Michael McConnell and Paul Kelly, who issued the earlier
ruling in favor of Nacchio, hit him hardest.
McConnell questioned how Nottingham
couldn't consider Fischel -- who has testifed more than 200
times, often for the government -- an expert.
Kelly asked if Kneedler believed it was due process when
told Nacchio's attorneys they weren't allowed to speak.
Chief Judge Robert Henry also jumped in, asking if
Nottingham's exclusion of the witness wasn't "over
"Why is 'total exclusion' what we should do here?" Henry said.
The court has several options. It may reverse the
three-judge panel's decision and uphold the conviction, send the
case back for a new trial, or send it back for a new hearing on
whether Fischel's testimony should be permitted.
The judges have not indicated when they might rule, and may do
so at any time. After the hearing before the three-judge
panel, it took the judges three months to issue an opinion.
Either side may also ask the U.S. Supreme Court to consider any
Exclusion of defense witness testimony
* Joe Nacchio's attorneys said they were surprised when U.S.
District Judge Edward Nottingham excluded testimony from a key
When the lawyers tried to ask for a hearing,
told them they couldn't speak.
"So (Nacchio) should go to prison for six years because the
court says he can't speak?" lawyer Maureen Mahoney said.
* Prosecutors said that Nacchio's attorneys were on notice that
they needed to provide more information about the witness and
Lawyers had the burden of providing it or asking for a hearing.
"If (Nacchio's) counsel really wanted to be heard . . . there
are any number of things counsel . . . could have done,"
prosecutor Edwin Kneedler said.
The judges have not indicated when they might rule, and they may
do so at any time. The court may:
* Reverse the three-judge panel's decision and uphold the
* Send the case back for a new trial;
* Send the case back for a new hearing on whether the defense
witness should be allowed to testify.
Experts' take on the testimony
* John Holcomb,
professor of business ethics and legal studies: Predicts a
5-4 or 6-3 vote to reinstate Nacchio's insider-trading
conviction. "(Maureen) Mahoney and the rest of the
appellate counsel were stuck with trying to rescue Nacchio from
* Rick Kornfeld, Denver
attorney and former federal prosecutor: "My prediction is
that they're going to reverse the panel. I don't think
it's a good day for Joe Nacchio."
Kornfeld said he was struck by the aggressive questioning, and
the fixation by the majority of judges on the fact that the
defense failed to explicitly ask for a hearing to qualify its
expert witness. "From my perspective, the (hearing)
focused on some of the really picayune, procedural details
rather than the larger issue of whether or not Nacchio got a
* Marcy Glenn, chair of Holland & Hart's appellate practice
group: "It's very dangerous to predict, so I won't do
that." But from the questioning, she said she sensed that
more judges accepted the government's position. She noted
the irony that a case of this importance would end up before the
full appellate court on such a narrow procedural issue.
"In the end, the issue boils down to the tension between a
district judge's discretion on a procedural issue and a criminal
defendant's right to due process."
* Curtis Kennedy, attorney for the Association of U S West
Retirees: "I think the vote is going to be 6-3 upholding
the conviction and then Nacchio's attorneys are going to have to
spin their wheels hoping the (U.S.) Supreme
Court grants a review."
* Jay Brown,
law professor: "It seemed like the views of the majority
of the judges were unmistakable" in terms of agreeing with the
If appellate Judge Michael Murphy is needed for a majority
opinion, the issue of the expert witness could be sent back to
District Court. Otherwise a reinstatement of the
insider-trading conviction is likely, he said.
Brown said he believes the appellate court is concerned about
the burden on trial judges if the onus is on them to hold a
hearing on a witness' qualifications.