Court Tosses Nacchio Conviction

Former Qwest Communications International Inc. (NYSE: Q) CEO Joe Nacchio is off the hook… for now.

A Denver appellate court has ordered a new trial for Nacchio after determining that the judge assigned to the case excluded some key expert testimony and classified information linked to the case.

In a 2 to 1 decision, the 10th Circuit Court of Appeals reversed a verdict handed down last April, which found Nacchio guilty on 19 of 42 counts of insider trading. (See Nacchio Found Guilty.)

In late July, Nacchio was sentenced to six years in prison and ordered to surrender $52 million in funds that he earned through insider trading. He was also on the hook for a $19 million fine. Nacchio has remained free on bail pending his appeal. (See Former Qwest Boss Gets Six for Insider Trading.)

According to the court's opinion filed today, Judges Paul Kelly and Michael McConnell voted for a new trial (Judge Jerome Holmes dissenting), citing in part that the judge originally assigned to the case, Edward Nottingham, excluded expert testimony from Northwestern University law professor and "expert witness" Daniel Fischel, who was slated to provide an economic analysis of Nacchio's trading patterns.

"We conclude that on the record before him the district judge was wrong to prevent Professor Fischel from providing expert analysis, and that this error was not harmless," the appellate court said.

Judge Nottingham, who has recently become the subject of an FBI investigation linking him to a Denver-based prostitution ring, incorrectly did not allow "classified information" tied to Qwest's business prospects and Nacchio's "state of mind" into the case, according to Monday's opinion. [Ed. note: More importantly, what was Nottingham's state of mind when he, well... never mind...]

The defense strategy relied heavily on the findings of the expert witness and the disallowed classified information, the appellate court noted.

"We agree that the improper exclusion of his [Nacchio's] 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 declared.

— Jeff Baumgartner, Site Editor, Cable Digital News

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