Corporate Governance

US v. Nacchio: Government Options

By Kevin O'Brien, Daniels College of Business, Denver

The following is a list of my initial reactions to the Tenth Circuit’s split decision to grant Joe Nacchio a new trial based upon the improper exclusion of his expert witness.

1.  While a victory for Nacchio, he would have preferred a finding by the 10th Circuit that the evidence at trial was insufficient to convict him. If the 10th Circuit court had so found, Nacchio would have won a complete victory since to try him again would violate the Double Jeopardy Clause. Moreover, the government’s positions on the balance of the appealable issues were validated by the 10th Circuit. Consequently, with this roadmap from the 10th Circuit, the government’s prosecuting team might be more efficient and effective the second time around resulting in another Nacchio conviction.

2.  While the government is weighing all its options at this time, one option that has to be considered is to petition the 10th Circuit for a review of the 2-1 decision by the full court under Fed. R. App. P. Rule 35(a)(2) on the basis that “the proceeding involves a question of exceptional importance.” Justice Holmes vigorous dissent on the expert witness exclusion issue invites the government to strongly consider this option. The question of “exceptional importance” is whether Nacchio’s disclosures related to his expert witness were sufficient under Rule 16 of the Federal Rules of Criminal Procedure or did Nacchio fail in his Daubert obligation to establish the admissibility of his expert’s testimony. Resolution of this question by the full court would go a long way in providing the needed guidance to district court judges within the circuit.

3.  It is worthwhile to note the contrast between the trial judge and one of the 10^th Circuit judges on the expert witness exclusion issue. In reaction to Nacchio’s attorney expressing surprise at the judge’s ruling to exclude the expert witness, Judge Nottingham stated in open court that if anyone would have told him that Nacchio’s attorneys would be surprised by his ruling, “you could have blown me over with a feather.” In contrast, Judge Kelley during oral arguments before the 10^th Circuit, expressed surprise and some indignation that Nottingham disallowed Nacchio’s expert witness.

4.  While it is another option that probably is remote but has to be considered, the government and Nacchio could avoid a trial by negotiating a lesser prison term (for example, a two to three year prison terms instead of the six years meted out by Judge Nottingham.) Ostensibly, strategic arguments can be made from both the perspective of Nacchio and the government. Both Nacchio and the government can avoid the “hazards of litigation” with a plea agreement because the government might lose in a retrial or Nacchio might face a similarly long six year prison term if he is again convicted. Moreover, both sides can avoid the cost of a new trial running into the millions. However, Nacchio may want to seek complete exoneration to avoid a guilty plea that could be used against him in the civil suits by shareholders and the SEC. Similarly, the government may want to seek another conviction to avoid public cynicism that might be triggered if it appeared that the wealthy can violate the rule of law and avoid the full retribution inherent in the law violated.

Full post as published by The Race to the Bottom on March 18, 2008 (boomark / email).