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Experts expect Nacchio guilty verdict to stand

Judges more hostile to ex-Qwest CEO's attorney

Sara Burnett and Jeff Smith

Published September 25, 2008 at 12:39 p.m.

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Attorneys for former Qwest CEO Joe Nacchio, grouped at right, leave with federal prosecutors, left, after a hearing before the 10th Circuit Court of Appeals on Thursday. Prosecutors want the court to overturn a ruling giving Nacchio a new trial.

Photo by Joe Mahoney / The Rocky

Attorneys for former Qwest CEO Joe Nacchio, grouped at right, leave with federal prosecutors, left, after a hearing before the 10th Circuit Court of Appeals on Thursday. Prosecutors want the court to overturn a ruling giving Nacchio a new trial.

Former Qwest CEO Joe Nacchio walks into the Alfred A. Arraj United States Courthouse in Denver, Colo., Friday July 27,2007 with his wife Anne Esker and son Michael,left . Nacchio was sentenced for 19 counts of insider trading and could face a fine of up to $1 million per count and up to 10 years in prison. Joe Nacchio was freed on bail pending the appeal of his conviction.

Photo by George Kochaniec Jr. © The Rocky

Former Qwest CEO Joe Nacchio walks into the Alfred A. Arraj United States Courthouse in Denver, Colo., Friday July 27,2007 with his wife Anne Esker and son Michael,left . Nacchio was sentenced for 19 counts of insider trading and could face a fine of up to $1 million per count and up to 10 years in prison. Joe Nacchio was freed on bail pending the appeal of his conviction.

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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 Denver on Thursday.

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 Nottingham 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 the top."

"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 unfavorable ruling.

Exclusion of defense witness testimony

The arguments

* Joe Nacchio's attorneys said they were surprised when U.S. District Judge Edward Nottingham excluded testimony from a key defense witness.

When the lawyers tried to ask for a hearing, Nottingham 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 his testimony.

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.

What's next

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 conviction;

* 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, University of Denver 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 bad lawyering."

* 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 fair trial."

* 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, University of Denver law professor: "It seemed like the views of the majority of the judges were unmistakable" in terms of agreeing with the government.

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.

Comments

  • September 25, 2008

    1:36 p.m.

    Suggest removal

    B300 writes:

    HE WILL GET TO WALK JUST LIKE THE PEOPLE RESPONDSABLE FOR OUR ECONOMIC PROBLEMS TODAY! WE WILL JUST SHELL OUT 700 MILLION AND DO NOTHING!!!WHEN WILL PEOPLE STAND UP FOR WHAT IS RIGHT? I PERSONALY GET TIRED OF TURNING THE OTHER CHEEK! WE NEED TO FRY THESE GUY'S!!

  • September 25, 2008

    2:23 p.m.

    Suggest removal

    riverrafter writes:

    My husband has his office furniture. If he wins, do you think he'll want it back?

  • September 25, 2008

    2:43 p.m.

    Suggest removal

    Buckwheat writes:

    This guy was convicted period. He's trying to loop hole his way out of going to jail. It was stated earlier several weeks ago that this witness would have had absolutely no bearing on the outcome of the trail. Nacchio is just stalling, and costing the taxpayers money. But if you have money I guess that's the American way..

  • September 25, 2008

    2:45 p.m.

    Suggest removal

    Steph writes:

    Well, NotChuckie, you and I completely agree on something!

    I think he'll walk too. Unfortunately, he stole $17,000 from my retirement fund and I'll never get that back. I'm just lucky I didn't lose more. I know people who lost $100k +.

  • September 25, 2008

    3:36 p.m.

    Suggest removal

    opinionatedcolo writes:

    I am not as sure as the rest of you that the fix is in. Remember, even if the court overturns the conviction, Nacchio still faces a second trial. The way public sentiment runs he still faces an uphill battle. Remember only two out of the three original appellate judges voted to overturn.

    By the way, if the court upholds the conviction, will you all get on here and apologize to the Court?

  • September 25, 2008

    3:38 p.m.

    Suggest removal

    Cowboy63 writes:

    I guess if you're rich enough you just keep having trials until you get the verdict you want.

    He stole $52 million and is free on $2 million bond? Why wouldn't he just flee to Argentina? He's still got $50 million left! Keep him locked up until the trial is over - it's probably as close to any 'time' as he's likely to see.

    I know people whose futures were destroyed by this guy - and he's walking around with a smirk on his face.

  • September 25, 2008

    4:27 p.m.

    Suggest removal

    T1anda writes:

    IF.... the court upholds the conviction people whom Nacchio devastated and stole from should dance in the streets!

    What's the old saying?? Money talks and BS walks!!!

  • September 25, 2008

    6:29 p.m.

    Suggest removal

    bxwatso writes:

    I'm no fan of Joe, he is a pig, but a lot of the blame goes to Trujillo. There is no reasonable way Trujillo didn't know that Qwest was a financial house of cards before he allowed U S WEST to be acquired. Trujillo got a huge bonus (140 MM?), and the majority of Qwest's future troubles then unavoidable. Joe's corrupt management is only responsible for at most $10Bln of the mess, probably only $7Bln.

    If Sol had waited 12 months, U S WEST could have bought Qwest for pennies in bankruptcy, but then he wouldn't have got his bonus. Sol probably didn't break the law, but he should have to give back his merger bonus.

  • September 26, 2008

    8:16 a.m.

    Suggest removal

    Scott writes:

    "... nearly unanimous prediction ... guilty verdict for the former Qwest CEO's insider trading trial will be reinstated."

    This is just devastating! I want the help. Let's start a K-Y Jelly fund for Nacchio. He's gonna need it ;-)

    Scott

  • September 26, 2008

    9:21 a.m.

    Suggest removal

    wanttruth writes:

    It is a sad day when everyone allows emotion and not justice and due process to be the deciding factors. Joe Nacchio broke no law and he is being tried by the government because he stood up for the very people who want to send him to prison by refusing to participate in the government's illegal domestic spying program.

    The justice department does not stand for justice. All they want is to harass and convict an innocent man because he had the guts to stand up for what is right and legal.

    Joe Nacchio's constitutional right to present a defense and receive the protections guaranteed by the constitution was clearly denied by the capricious and arbitrary actions of Judge Edward Nottingham (of the Diamond Cabaret Nottingham's).

    As one who attended the trial it was obvious Nottingham was skewing everything to ensure a conviction. He was anything but an impartial jurist.

    If Joe Nacchio's conviction is upheld it is a travesty of justice and a sad day for all Americans as the justice department continues to erode our freedoms.

    Matthew

  • September 26, 2008

    10:45 a.m.

    Suggest removal

    opinionatedcolo writes:

    Wanttruth, the jury disagreed. They acquitted on some counts and convicted on others after a lengthy deliberation, which tells me that they did consider the facts and render a decision on those rather than emotion.

    It is certain that Nottingham is a pompous jerk and difficult to be in front of, but there did also seem to be much evidence that Nacchio said things to pump up the stock to others, while selling his own. Nottingham's out of court indiscretions are not relevant to his ruling and the fact that you resort to personal attacks seems to point out that you are a less than unbiased source. Nacchio's high priced and very competent lawyers simply did not do what they needed to do to have this witness testify.

    Nacchio is hardly the worst of the worst but he seems still to not understand that pumping up stock to to others while cashing out yourself is both morally wrong and illegal. It is that complete lack of moral sense that seems to permeate corporate culture today which is in large part responsible for many economic issues today.

  • September 26, 2008

    11:54 a.m.

    Suggest removal

    jjez writes:

    Thank you, Opinionated! Very well said. And I hope matthew wanttruth reads it without bias and accepts it, but I doubt he will. I think all copies of the movie Wall Street should be burned! Greed is NOT good! What's that old saying: Money is the root of all evil. Not exactly, but greed for money is! I heard a radio ad today. A woman saying she didn't want to live in some house that 5 other families have already lived in. She wants a brand new one. This is what is wrong with society today. Everything is disposable, everything has to be brand new and so oversized that everyone knows you spent a bundle on it. I almost wish the economy would tank so everyone would have to go back to living modestly in modest homes and driving modest cars. I'm really tired of conspicuous consumtion. I'm tired of everything costing so much because everyone is so greedy. Although, to be truly honest, I'm sure I'd miss my nice paycheck and would get very tired of not being able to do what I want when I wanted to. To eat what I want when I want it. But it would be nice if things didn't cost so much!

  • September 26, 2008

    2:49 p.m.

    Suggest removal

    RoyalPayne writes:

    Who says crime don't pay?