Second look at bid for new Nacchio trial

Full appeals court to decide whether conviction stands

By Sara Burnett, Rocky Mountain News (Contact), Jeff Smith, Rocky Mountain News (Contact)

Published July 30, 2008 at 3:26 p.m.

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Photo by Joe Mahoney / The Rocky/2007

Federal attorneys Stephan Oestreicher Jr., center, Kevin Traskos, right, and James Hearty leave the Byron White U.S. Courthouse in Denver on Dec. 18 after arguing before the 10th Circuit Court of Appeals.

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.

burnetts@RockyMountainNews.com 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.

• July 30, 2008

  4:16 p.m.

  Suggest removal

  cpd writes:

  Hopefully, time is growing short for Joe to relax in his New Jersey mansion.

• July 30, 2008

  4:26 p.m.

  Suggest removal

  happymike44 writes:

  Well lets confiscate his lovely home and his fine autos.
  He destroyed how many lives with his little activity.
  Put the lying,cheating scumbag in jail.
  Let him become a big azz clown pillow for his new roomies.
  So joe get ready for your special sock beating with a bar of soap.
  Looks like joe will learn what the real bad boys look like.
  So joe have a great time where your going.
  Don't do the crime if you can't do the time.

• July 30, 2008

  4:37 p.m.

  Suggest removal

  uncledave writes:

  Ok, everyone who thinks Joe will ever do a day in jail raise their hands. That's what I thought. He's had the best defense that Qwest ratepayers can give (you didn't think he was paying for any of this did you???) He's thrown all the people doing his bidding under the bus and he'll walk. Money talks especially with the current administration. If he doesn't get off, George W. will pardon him on his way out the door. Anyone who thinks justice isn't for sale in the old US of A needs to get a grip.

• July 30, 2008

  4:41 p.m.

  Suggest removal

  Scott writes:

  Even if ol' Joe goes to the slammer, anyone want to bet that it will only be Club Fed?

  Scott

• July 30, 2008

  4:48 p.m.

  Suggest removal

  SockRayBlue writes:

  FloydHill

  He may have been a God at Qwest, but when he moved to USWest he knew nothing about telephony and insulted over a hundred years of tradition by calling the employees clowns. He and his cohorts lied to the stockholders over his mismanagement.

  Sure, he was a god at Qwest. All you people had to do was resell internet connections. We, at the former USWest, were treated like knuckle draggers. Mr. Nacchio quickly forgot that we were all trained to Bell System Standards and Practices.

  A fine last act to much history. I hope he suffers the death of the cowardly and lives in fear the remaining years he has left on this planet.

• July 30, 2008

  4:54 p.m.

  Suggest removal

  bira44 writes:

  Um, Floyd, what have you been smoking? Speak with any legacy employee and they will quote the RMN article that told the tale of how Qwest had to cut back $120 million on healthcare benefits for all its retirees, then almost as a casual afterthought mentioned how Joey was getting a $120 million bonus for that year.

  Nacchio treated his employees like little bastard children, all the while personally raking in millions upon millions of dollars for work that really was not done.

  Most employees bought Qwest stock (they believed Nacchio's shtick even as he was divesting himself of that same stock he knew to be inflated in value) for their retirement.

  One of a CEO's main responsibilities is to keep the company's stock valuable. It's why a CEO should be paid well. If a large corporation's stock is stable and based on sound economic principles, it is such because of the work of the head cheerleader, the CEO.

  If it tanks, and the CEO is quietly divesting his interests because he knows the stock was inflated and not based on sound economic principles, it is the CEO's fault and he/she needs to be held accountable.

  In Nacchio's case he knew Qwest was living an Enronesque life. He knew that one slight wind would bring down his house of cards. His children, the employees, know full well what a phony he is. Their hopes and dreams and hard work evaporated because of him.

  Remember what Charles Dickens said in Great Expectations: "In their little worlds in which children have their existence, there is nothing so finely perceived and so finely felt as injustice."

  Those folks don't love Joe Nacchio. They feel cheated, they see a great injustice being perpetrated by him and his cronies. They feel it finely and they perceive it for what it is: Criminal.

• July 30, 2008

  4:59 p.m.

  Suggest removal

  ISKIFREELY writes:

  Hang him!

• July 30, 2008

  5:03 p.m.

  Suggest removal

  SockRayBlue writes:

  bira44

  Thank you. That just about sums it up.

• July 30, 2008

  5:37 p.m.

  Suggest removal

  HolierThanThou writes:

  Other telecom executives have done the same as Nacchio and worse: they gave your telephone records to Bush and his merry band of crooks without so much as a warrant, which is required by law.

• July 30, 2008

  5:46 p.m.

  Suggest removal

  Who_Me writes:

  Gee, maybe it *was* because US West employees were clowns, ever think of that? Your customer service s*cked azz and the employees acted like they were entitled to have a job in some job workforce program. No one took responsibility, much of the management was inept ("here, you are now IT manager because you are a minority whatever, who cares about your qualifications"), and a good number were retired on the job. Yeah, it was a big loss when Useless West went away. The unfortunate thing is that Qwest retained too much of the old baggage, and the cancer of Useless West sickened Qwest.

• July 30, 2008

  6:35 p.m.

  Suggest removal

  SockRayBlue writes:

  Who_Me

  Original Qwest employee, right? Sounds like the rhetoric that Nacchio spread in that company.

  I've worked with you people and you are some of the dumbest SOB's I've ever talked to. Talk about arrogant and entitled! You all thought you were Joe's Chosen Ones. Ended up being chosen as toilet paper for his royal arse.
  Regarding the entitled minorities? Since USWest was around longer than Qwest it was forced to make "adjustments" per the EEOC.

  All in all, Who_Me, Bite me. I'm outta here. You still have to work. I'm retired......fool.

• July 30, 2008

  6:42 p.m.

  Suggest removal

  wanttruth writes:

  People wake up and get real. The decision by the Circuit Court of Appeals is an embarassment to all Americans in General and the people of Colorado and Denver in particular.

  Ask yourself the following question:
  Why do the Telecom Companies need Immunity from Prosecution and customer lawsuits for violation your rights and privacy and illegally turning over your phone records to the Government for domestic spying purposes?
  Then ask yourself the following question?
  Why was the only individual, the only Telecom Executive who refused to turn over your phone records, who refused to break the law and co-operate in these illegal activities for the Government, why was Joe Nacchio the only Telecom Executive prosecuted by theGovernment.
  The answer is because all the other Telecom Executives capitulated and illegally co-operated with the Government and turned over your records.
  Joe Nacchio is the only person who stood up for your rights and privacy. Because of this the Government came after him with a vengenance.
  Why did the Government not prosecute any other Telecom Executive when they traded stock and excercised options when the Telecom bubble was bursting, their sales and earnings were declining and their stock prices were tumbling.
  The answer is simple - They co-operated with the Government and broke the law. Now they want immunity and that's why they need it.
  It is time to not only want the truth it is time to demand the truth.
  America, Colorado and Denver demand that the justice system be used for justice not retribution.

  Matthew

• July 30, 2008

  7:50 p.m.

  Suggest removal

  Who_Me writes:

  Disclaimer: I do not nor have I ever worked for Qwest. Stupid assumption on your part, StuffASockInItRay. Doesn't change the fact that USW was worthless.

• July 30, 2008

  8:03 p.m.

  Suggest removal

  SockRayBlue writes:

  Who_Me

  Still doesn't change the fact that your a fool.

• July 30, 2008

  8:07 p.m.

  Suggest removal

  Who_Me writes:

  Oh, one of those educated telecom workers who don't know the difference between your and you're. You hurt me, take it back.

• July 30, 2008

  8:26 p.m.

  Suggest removal

  LOUIE writes:

  Joe should have bought Judge Nottingham a 3000.00 dollar all night lap dance at a stripclub, and a swank tart to romp with, things might have went smoother for Joe. I laughed when last week this same judge who is up to his eyeballs in stripclubs, appearing on the lists of an upscale prostitution service, ruled some prison inmate couldn't have the Karma Sutra while in prison. Wonder whats on that computer in your chambers, the one the taxpayers put up for you, eh judge?

• July 30, 2008

  10:04 p.m.

  Suggest removal

  Colin08 writes:

  Nacchio was accountable every day at Qwest to each employee and investors. What he said and did was more public than the actions of any employee.

  Thousands of employees and other investors made a lot of money from Qwest stock. They lost money when the Internet bubble burst, not because of Nacchio.

  But it’s easy to blame Nacchio instead of Wall Street market forces because he led the takeover of U S West, invested in a new network, improved the quality of service that U S West had let deteriorate.

  Anytime Nacchio sold Qwest shares, it was very public. Most people don't tell the world what they are doing when they conduct financial matters.

  Nacchio demonstrated he had principles and integrity in business, which is why he denied the Bush request for illegal secret wire taps and information. It also is clear that's why Qwest missed its results because government contracts were taken away from Qwest because Nacchio wouldn't do something that was illegal.

  If Nacchio were on trial in any other part of the U.S., he would be acquitted.

• July 30, 2008

  10:39 p.m.

  Suggest removal

  LOUIE writes:

  Suprised his guns didn't try to use the national security contracts and other sensitive government contracts in his defense stategy. They threaten the government with it's disclsure, and the matters were heard privately before the judge. Wonder if the RMN and others popped for bar number to fight the court in its ruling, to hear these issues behind closed doors. Joes boys wanted to show Joe was privy to a more optimistic finacial outlook than the public was aware of, as he dumped his shares. My only beef with Joe was he dropped a dime on someone he should have never mentioned. Still, Joe's going to walk or if he does see time, it will be a place like Eglin A.B., with a golf course breeze in his face. People of his position don't go to the big arena.

• July 30, 2008

  11:01 p.m.

  Suggest removal

  LOUIE writes:

  Joe Stalin handled all party communication before making his move. Trotsky didn't stand a chance with the man privy to all things, because of this unique position Stalin held. I wonder how many companies took our government up on the illegal wiretaps the government conducted? Wonder if immunity with hold for them as far as prosecution by private citizens seeking damages. Age old question, is it justified to break the law to insure national security in times of immediate crisis. Lincoln suspending Habeas Corpus. I think they do it even if it's wrong, it buys them time to deal directly and expedite counter measures. So what if 5 years down the road you're proven wrong, it was a necessary evil to whoever made the decision. Corporate America, the governments secret solders.

• July 31, 2008

  7:41 a.m.

  Suggest removal

  mrfxx writes:

  So wanttruth - what you are really saying is that not only should Nacchio have been prosecuted, ALL telecom CEOs and upper management should have been prosecuted too? I don't see anything in your posting that would indicate that Joe wasn't guilty as charged, just that the other telecom execs knuckled under to the Bush administration.

  Ever former Qwest employee I have spoken to (and yes, they did come from USWest) wants to see Nacchio and his cronies bankrupted in retirement just as they were: their pensions are worth pennies on the dollar of what they contributed (forget any earnings), and while Joe was SELLING stock, employees were forbidden to sell theirs (and the 401K plan had no option EXCEPT corporate stock). Convince me Nacchio et all in management had no clue the Qwest stock was ultimately going to be worth pennies on the dollar and didn't rush to divest themselves while sticking it to the workforce. How is that NOT criminal - and how does that not merit Nacchio et all making restitution to the employees retirement plans?

• July 31, 2008

  9:44 a.m.

  Suggest removal

  SockRayBlue writes:

  Who_Me

  Touché ............ Mother

• July 31, 2008

  10:13 a.m.

  Suggest removal

  Lara writes:

  He got off with a slap on the wrist. This is why we need white-collar crime laws like the proposal headed for November's ballot. I'm so sick of these guys screwing over the little guy in order to get rich and retire to some nice resort in the Bahamas with their secret Cayman Island funds. It's despicable and disgusting!

• July 31, 2008

  10:15 a.m.

  Suggest removal

  Lara writes:

  P.S. Floydhill --- Isn't it former Qwest employees who are pushing the corporate fraud initiative? How could they love Nacchio when so many of them lost their life savings in the wake of his scandaL?

• July 31, 2008

  11:14 a.m.

  Suggest removal

  jjez writes:

  wanttruth: you have a very narrow focus. Sure, Joe was the only one who didn't. But all the other telecoms didn't have their stocks plummet to the point where they were very nearly declared junk. And if you think that the gov has control of the stock market and could manipulate it to the point that only QWEST stock hit the skids (despite what Joe did with his and all the lies he told), then you're just dillusional. So is anyone else who believes that Joe is innocent. The stock prices fell because JOE LIED! He lied about earnings. And he kept spouting the boloney that Qwest was in line for "secret government contracts" that would have bolstered their earnings. Wouldn't that be the very essence of insider trading? He was the only one who knew about the supposed contracts. DUH!!! But you notice after reviewing the records his attorneys didn't try to use that in his defense because they knew it would seal his fate. He wasn't convicted on all counts, only some of them. Despite what you think, he is guilty. And he should pay. Of course, the retirees & employees that got screwed will never see any of the money he's supposed to pay back. The attorneys will get it all!

• July 31, 2008

  3:22 p.m.

  Suggest removal

  chrisp writes:

  Please tell me why anyone would invest any more than 15% of their investment portfolio in their company stock in the first place. I'm sick of hearing how much they lost....why don't they take some responsibility for their ignorance of investing 50% or more in one place. Don't they know the old saying....don't put all your eggs in one basket.

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