Nacchio appeal detailed in 58 pages
The brief argues there was insufficient evidence and the Denver
trial took place in an atmosphere of "vitriol."
By Andy Vuong
Wednesday, October 10, 2007
The appellate attorney for Joe Nacchio laid out his case
Tuesday, detailing in a 58-page opening brief why the former
Qwest chief executive should have his insider-trading conviction
overturned or, at the very least, be granted a new trial.
In arguing for an acquittal, defense attorney Maureen Mahoney
states there was insufficient evidence to prove Nacchio sold
Qwest stock on the basis of material, nonpublic information in
Mahoney asserts Nacchio should be granted a new trial because of
flawed jury instructions, the wrongful exclusion of a defense
expert witness and rulings related to Nacchio's classified
information defense. Mahoney also contends Nacchio's 72-month
prison sentence should be reduced to a range of 41 months to 51
"The indictment, trial, and conviction of Joseph P. Nacchio took
place in an atmosphere of prejudgment and vitriol," Mahoney
wrote to open the brief, filed late Tuesday with the 10th
Circuit Court of Appeals. "The prosecution yoked an
unprecedented theory to plainly insufficient facts, and hoped,
in a bitter and vindictive atmosphere, that it would be enough
to win a conviction from a Denver jury. It was."
After a month-long trial in Denver federal court, Nacchio was
convicted in April on 19 counts of illegal insider trading
connected to his sale of $52 million in Qwest stock. He was
acquitted on 23 other insider-trading charges. In addition to
the six-year prison sentence, he was ordered to forfeit the
ill-gotten gains and pay a $19 million fine.
Nacchio remains free on $2 million bail pending his appeal. Oral
arguments in the appeal are set for Dec. 18.
Several of Nacchio's former lieutenants testified during trial
that they repeatedly warned him beginning in late 2000 that
Qwest's financial condition was deteriorating and the company
would struggle to hit his lofty targets for 2001.
The prosecution contended Nacchio deliberately hid these
warnings from the public and accelerated his stock sales in
early 2001 because he knew the company was headed for a fall.
Mahoney said this argument was "unprecedented" for
"Insider-trading cases invariably charge executives with trading
ahead of merger news or imminent quarterly earnings
announcements, or on the basis of some other 'hard' inside
information," Mahoney wrote. "The extraordinary charges here
are based on the claim that Nacchio knew, eight months or more
in advance, that Qwest might not make its year-end 2001
She said the evidence fell short in that it did not prove three
- That Nacchio traded on the basis of inside information.
- That the information he had was material.
- That he intended to violate the law.
Mahoney also said the court erred by not instructing jurors
about the materiality of the information Nacchio received from
"As a consequence, the jury could have convicted Nacchio for
failing to disclose internal debates even if it determined that
he reasonably believed that Qwest would meet its projections,"
Nacchio has contended he was upbeat about Qwest because he had
top-secret information that the company was in line to receive
lucrative government contracts. Much of that defense went
unheard during trial, partly because of pretrial rulings made by
the court about what information would be admissible.
Mahoney made arguments about those rulings in a separate, sealed
1,041-word filing. The 58-page brief contained 15,902 words.
During his five-year tenure, Nacchio led Qwest through
tremendous growth. But the company nearly collapsed into
bankruptcy in the summer of 2002 amid an accounting scandal and
the tech downturn. Nacchio was ousted in June 2002. The
Denver-based company later restated more than $2 billion in
revenue booked under Nacchio's watch.
Joe Nacchio's case for appeal
- Convicted of 19 counts of selling Qwest stock on the basis of
inside information; he contends the case wasn't proved.
- Prison sentence should be reduced from 72 months to 41 to 51
months; he was also fined $19 million.
- Nacchio has contended he had secret information that Qwest
was to receive lucrative government contracts; that information
was not allowed during the trial.
Andy Vuong: 303-954-1209 or