Retrial: No sure way to tell who has edge

Jeff Smith and Sara Burnett

Originally published 12:05 a.m., March 19, 2008
Updated 09:45 a.m., March 19, 2008

Kozlowski

Swartz

Scrushy

Quattrone

Who has the upper hand if the government retries former Qwest CEO Joe Nacchio? It depends on whom you ask.

A panel of the 10th Circuit Court of Appeals reversed Nacchio's insider trading conviction Monday, saying a defense expert should have been allowed to testify on his behalf.

But it also said the government's evidence was enough for a jury to convict, so rather than acquit Nacchio, the judges sent the case back for a new trial. Prosecutors are expected to appeal the decision.

Meanwhile, legal experts already are handicapping the possible outcomes.

Plea bargain: A plea bargain is typical in cases that have been reversed. But several legal experts said it's unlikely here.

The government likely will want a deal that involves prison time - something Nacchio is unlikely to accept.

"Nacchio has gone this far, and I think he's a player," said MoyeWhite attorney James Rollin Miller.

New trial: Miller thinks a new trial favors Nacchio. His legal team wasn't allowed to present much of his defense at trial, while the prosecution already has shown its full hand. "At a retrial, the defense is holding all the cards," Miller said.

Denver criminal defense attorney Jeralyn Merritt said since Nacchio already has seen the government's case, "he can more specifically tailor his defense."

Some wonder if Nacchio's lead attorney, Herbert Stern, would try a second case. Stern at times rambled and at times appeared rattled by U.S. District Judge Edward Nottingham.

Merritt's take: "Does Nacchio want to start from ground zero (with a new defense team)? I thought the defense team was very good." Stern's team also may get along better with a new judge.

But others say the 10th Circuit's decision favors the prosecution. The Nacchio insider-trading case is a complex securities case. While the prosecution kept it relatively simple during the first trial, it would be able to home in even more on a second attempt.

At the first trial, prosecutors had to present evidence of 42 counts of insider trading, one for each time Nacchio sold stock between January and May 2001. That included two counts that dealt with more complicated growth shares.

The jury acquitted Nacchio on the earlier sales, but convicted on the 19 sales in the second quarter.

At a retrial, the government only would have to focus on those counts.

University of Denver professor John Holcomb said the 10th Circuit's ruling that the government's evidence was sufficient for a jury is another good sign for prosecutors.

"This makes it highly unlikely that another jury and court will come to a different conclusion on guilt when the case is argued on remand," he said.

There's another possible wrench. If a Democrat is elected president in November, U.S. Attorney for Colorado Troy Eid, a Republican, is likely to be replaced.

And Eid's lead prosecutor on the Nacchio case, Cliff Stricklin, is leaving the office for private practice next month.

Eid has said the Nacchio case remains in capable hands with prosecutors James Hearty and Kevin Traskos. But a new U.S. attorney could bring in a whole new team - or decide to drop the case altogether.

Second time

Here are the outcomes for some notable executives accused of corporate fraud:

Dennis Kozlowski, former CEO of Tyco International Ltd.; Mark Swartz, former Tyco chief financial officer

* Accusations: Kozlowski and Swartz were charged in September 2002 with stealing $170 million from Tyco by abusing corporate loan programs and taking unauthorized bonuses and by taking $430 million more by selling stock at prices artificially inflated by misstatements about company finances.

* First trial: Ended in mistrial in April 2004 after several news organizations published a juror's name during deliberations, and the juror told the judge she received a threatening letter and phone call.

* Second trial: Prosecutors tightened their case and spent far less time on Kozlowski's extravagant lifestyle.

* Results: Both men were convicted June 17, 2005, of grand larceny, conspiracy, securities fraud and falsifying records.

Richard Scrushy, former CEO of HealthSouth

* Accusation: Prosecutors accused Scrushy of masterminding a $2.7 billion accounting fraud at HealthSouth Corp. to inflate the company's stock price.

* First trial: Acquitted by a Birmingham, Ala., jury in June 2005, despite the 15 guilty pleas from other former HealthSouth executives who implicated Scrushy.

* Second trial: Six Alabama charges of bribery, mail fraud and conspiracy. Defense lawyers denounced the case as a sour-grapes effort to win a conviction.

* Results: In June 2006, Scrushy was convicted of paying $500,000 of bribes to former Alabama Gov. Don Siegelman.

Frank Quattrone, former investment banker at Credit Suisse in New York

* Accusation: Prosecutors said Quattrone hindered the government's investigation of Zurich-based Credit Suisse, Switzerland's second-largest bank, by endorsing a subordinate's e-mail that advised employees to "clean up" their files. The government said he sent the message, suggesting that subordinates destroy records, after learning that a grand jury was probing how Credit Suisse doled out IPO shares.

* First trial: Hung jury in October 2003.

* Second trial: Conviction for obstruction of justice and witness tampering in May 2004.

* Results: Conviction reversed on appeal. Prosecutors decided not to re-try him and dropped the case in August 2007.