Legal News

Tenth Circuit Upholds Nacchio?s Conviction; Prison Time Likely Awaits

By Dionne Searcey

Former Qwest CEO Joseph Nacchio talks to the media outside the federal courthouse in Denver, Dec. 20, 2005. (AP Photo/Ed Andrieski, File)

In a squeaker of a decision, the full Tenth Circuit earlier today upheld former Qwest CEO Joseph Nacchio insider trading conviction, offering another setback to the former telecom high flyer’s attempt to reverse a jury’s decision in 2007. The court also revoked his bail, so Nacchio is likely headed to prison in the near future. Click here for the ruling; here for the Denver Post’s account.

Nacchio was convicted nearly two years ago of 19 counts of insider trading for selling off Qwest’s stock even as he knew the Denver-based telecom company’s finances were heading south. Since then he’s been fighting the conviction, with the help of his high-profile attorney, Latham & Watkins’s Maureen Mahoney. Nacchio has been free on a $2 million bond since then, and has spent toggling between his New Jersey and Florida homes.

In a 5-4 vote, the appeals court overturned an initial three-judge panel’s decision to grant Nacchio a new trial. Nacchio and his attorneys had based their appeal on the exclusion of testimony from an expert witness, Daniel Fischel, one of three witnesses he presented in his defense at the trial. Nacchio’s attorneys had said Fischel would have testified that Nacchio’s stock sales were consistent with his previously announced plan for selling off stock and weren’t fueled by insider knowledge about the then-troubled Qwest.

In his dissent, Chief Judge Robert H. Henry questioned the competence of Nacchio’s attorneys, which included lead attorney Herbert Stern. The judge indicated Nacchio’s defense had numerous opportunities to make their case for Fischel’s testimony to be heard but didn’t take advantage of them. At the same time, he also said the district court was not clear “and it abused its discretion in excluding Mr. Nacchio’s expert.” Added the judge: “Though I fear for today’s result, I do not believe this case is over,”

Nacchio’s defense attorneys did not immediately return calls for comment. In the past, the attorneys have said they would petition the U.S. Supreme Court to hear the case. In the meantime, the U.S. Bureau of Prisons will decide soon where Nacchio will be assigned to serve his six-year conviction.

Former U.S. Attorney Troy Eid, who oversaw the case but recently left to become partner at Greenberg Traurig, was ebullient about the decision. “It’s a tremendous day for the United States government,” he said. “I couldn’t be happier.”

Update: Maureen Mahoney just offered a statement. “We are profoundly disappointed by the Court of Appeals’ closely divided en banc decision. . . . We are optimistic that the Supreme Court of the United States will review the case, not just to resolve the conflicts but to correct what the chief judge of the Court of Appeals described as a ‘draconian decision’ to deprive Nacchio of his fundamental right to a defense. . . ”

Full post as published by Law Blog - WSJ.com on February 25, 2009 (boomark / email).