New precedent is only certainty
By Scott Robinson
Rocky Mountain News
Wednesday, December 19, 2007
Will the Nacchio conviction survive appeal?
While it is tempting to predict that it won't, based on the
thrust and tenor of the questions asked by two of the three
judges during Tuesday's extended oral argument, experience
teaches that judges' inquiries in such hearings aren't always
the most reliable indicators.
Forecasting the outcome of an appeal ought to be much easier
than foretelling a jury verdict, where the analysis includes not
only the testimony and exhibits but also the effect of that
evidence on 12 different people.
Issues on appeal are limited to those raised in briefs.
All that the 10th Circuit Court of Appeals has to do is apply
established legal precedents, prior written opinions or "case
law" issued by the U.S. Supreme Court or any of the federal
Therein lies part of the problem: Joe Nacchio was
prosecuted under an unusual theory, with the defense
unsuccessfully attempting to use an equally innovative defense.
On both fronts, legal precedent is in short supply.
Instead of going after Nacchio for making false statements or
accounting fraud, tactics not always successful in past
corporate wrongdoing cases, the government instead charged him
with insider trading, using his sales of nearly $100 million of
Qwest stock in the first six months of 2001 as proof that he
traded on inside information -- in the form of warnings given to
Nacchio by other Qwest executives that the company would have
difficulty reaching its publicly announced earnings goals.
Insider-trading prosecutions usually involve a one-time purchase
or sale of stock by a corporate executive in anticipation of a
definite future transaction, not earnings predictions.
Nacchio's trial attorneys sought to counter with a defense
borrowed from civil securities fraud cases that a corporate
insider cannot be held culpable for "forward-looking" earnings
projections, if accompanied by cautionary "risk disclosures"
about the uncertainty of the investment.
Nacchio could not be convicted for selling off stock as "insider
trading," the defense argued, since his public pronouncements
heralding Qwest's rosy economic future were accompanied by
warnings about the risks.
Appeals are not about guilt or innocence. The panel
hearing the case will decide if Nacchio received a fair trial.
As soon became obvious from the exchanges between the judges and
the attorneys Tuesday, it will come down to whether there was
enough evidence to convict him of insider trading based on what
he knew at the time of the stock sales, whether the jury was
properly told what was "material" information for insider
trading purposes and whether there was any justification for the
extreme limitations placed on the testimony of the sole defense
expert witness, Daniel Fischel, by the trial court, Judge Edward
While it appears the majority of the panel leans toward
reversing Nacchio's conviction and granting him a new trial, one
thing about their decision can be predicted with certainty:
A significant legal precedent will be established.
Scott Robinson is a
trial lawyer specializing in personal injury and criminal