No jail during ex-CEO's appeal, motion asks

Jeff Smith, Rocky Mountain News

Tuesday, July 24, 2007

Former Qwest CEO Joe Nacchio should remain free pending appeal of his insider-trading conviction, his attorneys argued Monday.

The 59-page motion asserted there are "substantial issues" for appeal based on jury instructions, the evidence itself, the exclusion of expert testimony and the judge's decision to limit Nacchio's classified-information defense.

Jeff Dorschner, spokesman for the U.S. attorney's office in Colorado, said the government will oppose the motion.

Nacchio is scheduled to be sentenced Friday, with the government seeking a prison term of seven years and three months, fines up to $19 million and forfeiture of $52 million. Nacchio's team is arguing for a lenient sentence.

The appeal process likely will run more than a year.

Nacchio's motion for bail pending appeal is the first evidence of the work of his appellate attorney, Maureen Mahoney of Latham & Watkins in Washington, D.C., who has a nearly unblemished record arguing in front of the U.S. Supreme Court.

Denver defense attorney Jeralyn Merritt said last week she didn't think U.S. District Judge Edward Nottingham would let Nacchio out during appeal. That would require Nottingham to acknowledge he did something wrong, she said.

Defense attorneys argued Nacchio is a "rare, if not unique" example of someone being convicted "on supposed 'knowledge' that the company would not meet long-range (revenue) projections."

Nacchio's attorneys maintained other Qwest senior managers possessed the "very same 'inside' information" - including Drake Tempest, Qwest's general counsel at the time. Yet, they wrote, there is no evidence that Tempest advised Nacchio or anyone at Qwest to stop selling stock or improve investor disclosures.

Experts have said Nottingham set the bar high for the prosecution during jury instructions. But Nacchio's attorneys argued that instructions on good faith and "material" information were flawed and potentially devastating to Nacchio.

Nacchio's attorneys also argued Nottingham abused his discretion when excluding defense testimony by an expert on the basis of improper notice.

Finally, the defense has said that Nacchio, based on classified information, believed Qwest was poised to land lucrative government contracts. His attorneys say Nottingham shouldn't have limited Nacchio's ability to cross-examine government witnesses to show the reason Qwest didn't receive the contracts.

Developments

Motions were filed in a flurry Monday, four days before former Qwest CEO Joe Nacchio is to be sentenced.

• Nacchio's attorneys argue he should remain free pending appeal of his case. They cite flawed jury instructions, weak evidence and the exclusion of expert testimony.

• U.S. District Judge Edward Nottingham will allow victims to testify at the sentencing, but narrowed the definition of a victim to a person who bought Qwest stock on the same days Nacchio illegally sold shares.

• Prosecutors requested the medical records of Nacchio's oldest son, David, to determine the relevancy of Nacchio's argument that he should be granted leniency because of his son's emotional difficulties. Nacchio's attorneys agreed to provide the file to Nottingham and let him decide whether prosecutors should see it.

smithje@RockyMountainNews.com or 303-954-5155. Sara Burnett contributed to this report.