Second look at bid for
new Nacchio trial
Full appeals court to decide whether conviction stands
By Sara Burnett and Jeff Smith
Thursday, July 31, 2008
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
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
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
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
* 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.
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
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
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.
* 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
* Oral arguments will be heard Sept. 24 at 2 p.m.
* The court may issue its ruling at any time.