Ex-Qwest CEO's convictions overturned

Government will retry Nacchio case from scratch

Ex-Qwest CEO Joseph Nacchio won a temporary reprieve this week when a U.S. appeals court overturned his 19 insider trading convictions and demanded that his case be retried.

The ruling, which was issued by a three-judge panel for the U.S. Court of Appeals for the 10th Circuit, stated that Nacchio had been tried unfairly because the Federal District Court in Denver had barred the testimony of Professor Daniel Fischel. Fischel, a law professor at the University of Chicago, had been called as an expert witness who testified on the significance of inside information Nacchio was alleged to have used. Because Fischel's testimony was crucial to the defense's case that no reasonable investor would have found Nacchio's inside information useful, the court ruled that the case be retried at a future date in front of a different judge.

"This is a setback, not a defeat," Denver U.S. Attorney Troy A. Eid told the Washington Post . "The good news is the circuit court said our trial team presented sufficient evidence to convict Mr. Nacchio of insider trading."

Nacchio was convicted on 19 counts of insider trading relating to $52 million in stock sales last April. Nacchio, who served as Qwest CEO from 1997 to 2002, resigned from the company after its shareholders began questioning his $27 million annual compensation package. In March 2005, the U.S. Securities and Exchange Commission (SEC) charged Nacchio and eight other former Qwest executives with fraud, and Nacchio was indicted on 42 counts of insider trading in the Colorado U.S. District Court in December 2005.

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Ex-Qwest CEO Joseph Nacchio won a temporary reprieve this week when a U.S. appeals court overturned his 19 insider trading convictions and demanded that his case be retried.

The ruling, which was issued by a three-judge panel for the U.S. Court of Appeals for the 10th Circuit, stated that Nacchio had been tried unfairly because the Federal District Court in Denver had barred the testimony of Professor Daniel Fischel. Fischel, a law professor at the University of Chicago, had been called as an expert witness who testified on the significance of inside information Nacchio was alleged to have used. Because Fischel's testimony was crucial to the defense's case that no reasonable investor would have found Nacchio's inside information useful, the court ruled that the case be retried at a future date in front of a different judge.

"This is a setback, not a defeat," Denver U.S. Attorney Troy A. Eid told the Washington Post. "The good news is the circuit court said our trial team presented sufficient evidence to convict Mr. Nacchio of insider trading."

Nacchio was convicted on 19 counts of insider trading relating to $52 million in stock sales last April. Nacchio, who served as Qwest CEO from 1997 to 2002, resigned from the company after its shareholders began questioning his $27 million annual compensation package. In March 2005, the U.S. Securities and Exchange Commission (SEC) charged Nacchio and eight other former Qwest executives with fraud, and Nacchio was indicted on 42 counts of insider trading in the Colorado U.S. District Court in December 2005.

In its case, the SEC alleged that Nacchio and other Qwest executives fraudulently represented certain one-time sales of network capacity as recurring revenue in an effort to inflate the company's stock price and obtain maximum returns on the company's pending $44 billion stock-based acquisition of U.S. West, which was completed in 2000. The federal indictment accused Nacchio of unloading his stock while at the same time predicting "extremely aggressive" growth for the company.

Robert Mullins from the IDG News contributed to this report.

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