Insider Trading Conviction of Qwest's Joe Nacchio Reversed

By Jeralyn, Section Crime in the News
Posted on Mon Mar 17, 2008 at 02:14:25 PM EST
Tags: Joseph Nacchio (all tags)

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The Tenth Circuit Court of Appeals has reversed the insider trading convictions of former Qwest CEO Joseph Nacchio. The panel voted two to one for reversal and ordered that a different judge preside over a re-trial.

The reason: The judge's exclusion of Nacchio's expert witness.

"Mr. Nacchio appeals, arguing that the evidence was insufficient to convict him, that the jury was improperly instructed, and that the trial judge incorrectly excluded evidence — expert testimony and classified information — important to his defense," the decision states. "We agree that the improper exclusion of his expert witness merits a new trial, but we conclude that the evidence before the District Court was sufficient for the government to try him again without violating the double jeopardy clause."

The Court did not agree with Nacchio he should have been able to present his classified information defense. Nor did it agree with him that the jury instruction on materiality was fatally flawed. It also found that a properly instructed jury could have found him guilty of insider trading.

You can read the opinion here (pdf.) [More...]

I'll update this post after I've had a chance to review the opinion. I was in the courtroom to live-blog much of the trial and the appellate oral arguments. Some of my coverage is accessible here but most of it is 5280.com.

And remember, no judge-bashing on unrelated matters as I regularly appear before the trial judge.

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Insider Trading Conviction of Qwest's Joe Nacchio Reversed | 18 comments (18 topical)

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Interesting turn of events (5.00 / 1) (#2)
by standingup on Mon Mar 17, 2008 at 03:04:52 PM EST

Good news for Nacchio. Is there a chance now that the new trial will involve testimony regarding on the administration's requests from teleco's prior to September 11, 2001 that Qwest resisted?

I don't think so (none / 0) (#6)
by litigatormom on Mon Mar 17, 2008 at 03:19:07 PM EST

See my post above. The 10th Circuit ruled that the trial court did not err in excluding certain "classified" evidence.


: Thank you (none / 0) (#8)
by standingup on Mon Mar 17, 2008 at 03:34:01 PM EST

I guess I got ahead of myself in feeling optimistic there. Still, good to see the appellate process work to support a fair trial.

I honestly don't care (5.00 / 1) (#3)
by jtaylorr on Mon Mar 17, 2008 at 03:05:47 PM EST

if he's guilty or not; the fact that he risked losing government contracts (which he did) because he refused to illegally wiretap for the NSA more than makes up this.

Irony is the spice of life (5.00 / 1) (#9)
by Dadler on Mon Mar 17, 2008 at 03:35:25 PM EST

It seems he's been convicted of insider trading while dissenting. Black and white and grey all over.

I Hope That (5.00 / 1) (#12)
by squeaky on Mon Mar 17, 2008 at 03:58:41 PM EST

He has better luck next time around. It seems rare these days that anyone stands up to BushCo, and whether or not Nacchio is a crook. He is an honorable man for not caving into DOJ's demands.

: Well said squeaky.... (5.00 / 1) (#17)
by kdog on Mon Mar 17, 2008 at 05:53:07 PM EST

he may be a crook, but if he is he is a crook who didn't take no sh*t from the government, and protected his customer's privacy. That would make him my kind of crook:)

Interesting take from Digby (none / 0) (#1)
by wasabi on Mon Mar 17, 2008 at 02:59:44 PM EST

"Joseph Nacchio was the CEO of Qwest Communications, and seven months before 9-11 (let me repeat, BEFORE 9-11), he and his company were asked to assist the US government in providing access to their communications networks without a warrant. Of all the telecoms, Nacchio and Qwest were the only ones to refuse. The government consequently pulled a bunch of their top-secret contracts and generally made it impossible for Qwest to do business. The stock dropped precipitously, and later federal prosecutors arrested Nacchio for insider trading, for having sold a significant amount of his holdings before the stock tanked. He claimed that he was actually trying to raise capital to exercise options and buy more stock, as he expected the government contracts to be renewed. This all went to trial and Nacchio was convicted last year."

The 10th Circuit ruled that Nacchio (5.00 / 1) (#5)
by litigatormom on Mon Mar 17, 2008 at 03:18:21 PM EST

was properly prevented from proffering "classified" evidence -- which I assume relates to the government retaliation issue. The sole basis of the reversal is the exclusion of expert testimony. I'm not sure, based on the description of the testimony in the decision, that it would necessarily lead to an acquittal before a different jury, but the 10th Circuit said it was possible it could.

I've never read the transcripts of the trial, but from the little bit quoted in the decision, it sounds like the judge was hopelessly biased. It is very unusual for a case to be remanded to a different district court judge, and the judge has to have behaved incredibly badly. The only time I asked for that relief was when we took over an appeal from the lawyers who had tried the case before a Detroit jury, and the judge had let in a bunch of racially inflammatory remarks about Koreans in the other side's opening and closing (our client was a Korean manufacturer of auto parts). The case did get reversed and remanded -- to a different judge.


Read page 59 (5.00 / 1) (#7)
by Jeralyn on Mon Mar 17, 2008 at 03:25:32 PM EST

of the opinion.The court did not come anywhere near finding judicial misconduct. On page 59 of the opinion, the court expressly rejected Nacchio's allegation that the judge was personally biased against him.

The only ground for ordering another judge was the court's finding that it would be hard for the judge to retry the case with a "fresh mind" -- it found the judge could not reasonably be expected to put aside his previously expressed views or findings that have now been determined to be erroneous or based on evidence that has been rejected.

Also, the court had the option to find, but did not, that a new judge was necessary to preserve the appearance of justice.


: I understand the court didn't make a finding (none / 0) (#10)
by litigatormom on Mon Mar 17, 2008 at 03:40:41 PM EST

of bias or misconduct by the judge. In my own experience, the appellate decision didn't explain the reassignment at all. You watched the Nacchio trial, I certainly did not. I just think as a practical matter that cases are unlikely to be reassigned unless the appellate court thinks that the trial judge had in some way misbehaved -- even if not "improperly" in the technical sense. But since I am unencumbered by knowledge of the trial record in this case, my generalization may not apply here.

: Whatever the reason stated, it seemed clear (none / 0) (#13)
by scribe on Mon Mar 17, 2008 at 05:01:07 PM EST

to me, anyway, that issue two on the Circuit's agenda was reassigning it. Issue one, of course, being explaining why the reversal.
The Circuit changed trial judges in a very polite, classy, and neutral way.
End discussion.

Heh (none / 0) (#11)
by Steve M on Mon Mar 17, 2008 at 03:54:43 PM EST

We always had a way with jury trials in Detroit. During one of the most famous and inflammatory trials in Detroit history - the Malice Green case where two white police officers were convicted of the beating death of a black man - one of the movies shown to the sequestered jury was Malcolm X.


No way! (none / 0) (#14)
by litigatormom on Mon Mar 17, 2008 at 05:03:14 PM EST

You're kidding, right? Please?


: Not at all (none / 0) (#16)
by Steve M on Mon Mar 17, 2008 at 05:47:52 PM EST

It did end up being a significant ground for reversal, though.
That trial sure was a big deal. Our late mayor, the sort of guy who makes Al Sharpton seem like a calming influence, said on TV that the victim was "literally murdered by police." Oh, and he mentioned that the "wrong" verdict might result in riots. You can imagine the motions that got filed.

As to the classified evidence, the (none / 0) (#15)
by scribe on Mon Mar 17, 2008 at 05:05:12 PM EST

Circuit left Nacchio a lot of room, actually.

While they said that he couldn't argue that his possession of classified evidence of positive indications would be admissible to prove his alleged trading on negative indications was not improper insider trading, they left him with a lot of other angles he still could approach it from. At least as I see it.

One would be that the government, by not awarding the secret contracts, caused the losses QWest suffered (or made them greater), which might well have some relevance for sentencing purposes.

Second, as to vindictive or selective prosecution.

He still has some room on the secret evidence.


Well, I was going to ask (none / 0) (#4)
by Anne on Mon Mar 17, 2008 at 03:09:14 PM EST

if this was the case that was brought after Nacchio refused to cooperate in the warrantless wiretapping, but I see that question has been answered.

Interesting development.

Excellent! (none / 0) (#18)
by jere on Mon Mar 17, 2008 at 08:00:41 PM EST