Nacchio Gets a New Trial

In news that may have repercussions for Bush’s attempt to hide all details of his warrantless wiretapping program, Joseph Nacchio just won a new trial (h/t scribe). Mind you, the reason his trial was overturned does not relate directly to his claim that the Administration retaliated against him because he refused to illegally wiretap Americans. Rather, the Appeals Court overturned his case because he was not allowed to make a case for his expert witness.

A federal appeals court ordered a new trial Monday for former Qwest CEO Joe Nacchio, saying the trial judge wrongly excluded expert testimony important to Nacchio’s defense in his insider trading case.

[snip]

Attorneys for Nacchio told the 10th U.S. Circuit Court of Appeals in December the case against him didn’t meet standards set by previous court rulings.

Nacchio’s attorney, Maureen Mahoney, also told the court that U.S. District Court Judge Edward Nottingham wrongly prevented a defense witness from testifying and that Nottingham’s instructions to the jury were inadequate.

[snip]

At the appeals hearing, the judges repeatedly asked Oestreicher why Nottingham denied Daniel Fischel from testifying in Nacchio’s defense. Prosecutors say the defense didn’t establish the reliability of Fischel’s opinions or disclose how he arrived at them.

Nacchio’s attorneys say Fischel, an expert on corporate law and markets, was a core part of his defense and could have explained to jurors what must be publicly disclosed and that Nacchio’s stock sales were to diversify his portfolio. Mahoney said a reasonable jury hearing testimony from Fischel would have acquitted Nacchio.

So the Appeals Court has not specifically said Nacchio should be able to tell us about being strong-armed to wiretap Americans (that’s not why they accepted his appeal). But given another trial–not to mention the House’s recent confirmation that different carriers responded to government requests differently (that is, AT&Treason happily wiretapped us, while Qwest resisted)–Nacchio might have the opportunity to explain why he thinks he was retaliated against because he believes in the Fourth Amendment.

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52 replies
  1. cobernicus says:

    All of this just points out the real beneficiaries of the “telecom amnesty.” The telcos may lose some $$ in a civil suit, but the testimony will reveal which minions of this administration actually ordered the illegal taps, exposing them to criminal charges. Let’s see.. Cheney, Gonzales, Meiers, and the beat goes on.

  2. jayackroyd says:

    One thing that has confused me, and digby reminds me that it confuses me, is that Nacchio claimed that the Qwest was contacted pre-9/11.

    But all of telecom amnesty bills refer to post-9/11. I’m pretty sure about this, because Kevin Drum said that, and I, about to post a comment saying ‘can’t be,’ I checked. And my recollection is that he’s right.

    Does this mean that they approached the telcos before 9/11, but initiated the program, by happenstance, afterwards? Does it mean anything?

    • readerOfTeaLeaves says:

      Correct.

      And one wonders what kind of defense Nacchio might be able to mount if he could get his hands on some of those 5,000,000 missing emails, eh?

      • maryo2 says:

        “They initiated some of the program after 9/11, but it appears that, at a minimum, they set up the underlying infrastructure for the wiretap program in January-February 2001.” -ew

        And this has made me spend hours trying to figure out what the plan was for the FBI’s Investigative Services Division (ISD) before 9-11. My theory is that the gutting of existing avenues of intelligence gathering had begun before 9-11. (Tin foil hat says illegal wire taps of Mohammed Atta were in place, but the White House did not act on intelligence because they did not have a FISA warrant and did not want to reveal their NSA wiretapping program.)

        The ISD was “on its last legs” in July 2001, according to “Frank,” an Intelligence Operations Specialist in the Radical Fundamentalist Unit of the FBI.

        But later in the same FBI report it is stated that:
        In the wake of September 11, the FBI concluded that analysts would be more effective if they were controlled by the operational divisions. ISD was abolished, and analysts were dispersed back to the divisions in which they originally served.”

        (see http://www.fas.org/irp/crs/RL32336.html#n_61_)

    • emptywheel says:

      No.

      The initiated some of the program after 9/11, but it appears that, at a minimum, they set up the underlying infrastructure for the wiretap program in January-February 2001.

      The immunity offers only cover post-9/11–that was one of the big concessions, according to Jello Jay.

      • readerOfTeaLeaves says:

        Ah. Thanks for the correction.
        I had the sequence wrong.

        But it would be ever so nice if any of the 5,000,000 WH emails could be located, and turn out to be of any use to Mr. Nacchio.

      • bmaz says:

        Not much of a freaking concession. There are no suits regarding that time period and the statute of limitations has run.

        JayAckroyd – I have explained my thoughts on that before both here and at TNH, and am happy to do so again; but no time right now, must fly outta here….

  3. jayackroyd says:

    cobernicus–

    bmaz has been very persuasive in arguing that the telcos had already acquired immunity from the AG, or they would not have agreed to the surveillance.

    Now, I haven’t heard him/her explain why QWEST would not have considered that adequate protection. But it does seem unlikely they would expose themselves to the statutory financial risk without some kind of serious protection.

  4. Neil says:

    Cheney’s travel trailer installed in a C-17 transport. Who got the contract MZM or KBR? The Secret Service decided against conducting formaldehyde abatement procedures. They thought abatement might cause health problem.

  5. jayackroyd says:

    no sweat bmaz. just a link, at your leisure, would be great.

    It’s not like it’s a pressing issue.

  6. earlofhuntingdon says:

    It will be interesting to see if the White House’s Department of InJustice decides to drop this case (in favor of prosecuting immigration and gun cases, of course). It would garner considerably more press the second time around, and result in more public and protracted arguments about revealing government “secrets” (note: not “national security” secrets).

    Given the Libby trial, disclosure of dragnet spying on Americans’ e-mails and calls pre-post 9/11, and other revelations, any jury would take Nacchio’s claims far more seriously. Taking this to trial in an election year would not help the GOP. Worse, a trial might extend beyond the term of the current US Attorney; a change at the top could well disclose a lot more about Bush then QWEST. Let’s see what Mukasey does, shall we?

  7. earlofhuntingdon says:

    Slightly OT, but too delicious to pass up, Scott Horton reviews last week’s tornado of bad news – and MoDo’s persnickety critique of Bush’s cheerful, oblivious responses to it – and identifies what may be the most plausible reason for it:

    Certainly we can’t rule out another possibility: better living through chemistry. After all, the capstone to his utterly bizarre visit to New York on Friday was, according to one observer, a death-grip on-stage hug administered to Henry Kissinger.

    I’ll take an Irish whiskey. Better make it a double.

    http://www.harpers.org/archive…..c-90002661

    Happy St. Patty’s Day.

  8. jayackroyd says:

    Not much of a freaking concession. There are no suits regarding that time period and the statute of limitations has run.

    And hadn’t read that far into the thread. [insert normal dumbass disclaimer for doing that. It should be in my sig, with a note about the value of previewing.]

  9. earlofhuntingdon says:

    Other thoughts:

    The original trial, in a recently post-9/11, post-Enron era, played as “good government ferrets out bad, rich, corporate insider trader”. Neither Bush nor his DOJ any longer has a patina of good government about them.

    Nacchio is no longer the CEO who fired a lot of local employees in a mega-merger that made him mega-rich. He can present a plausible case for being an astute businessman who wanted to make money, but who also followed the law, unlike a corrupt federal government that illegally spied on its citizens for partisan – not national security – reasons and wanted QWEST to aid and abet its crimes.

    I would imagine that presents a much tougher case to prosecute in an election year in what is now a swing state. What would Karl do?

  10. PJEvans says:

    I see the corporate media have decided to ignore this story: not seeing it at the LA Times site, or at CNN.com.

  11. Neil says:

    EW, is there a Beamish in your future today at beer-thirty in honor of Saint Patrick’s Day. A toast! To your health and to the health of all the emptwheelers, commenters and lurkers alike. Cheers!

    • emptywheel says:

      Dunno. I’m in DC at the TAke Back America conference, so my beer choices are really dictated by what the people throwing parties give me.

      Plus, now that I’ve banned Jodi, who will search out Beamish for me?

      • earlofhuntingdon says:

        Never noticed the Jodster was absent. Frown.

        Well, if you’re in DC, you can’t be more than about three blocks from an Irish pub. They’re all Irish on St. Patty’s Day; just follow the green lines on the pavement.

        There’s a small Irish rugger pub on Mass, between G and Capitol Sts, near Union Station. There’s another Irish pub on K near 20th, and an Irish sports bar near Conn & N. The hotel at DuPont and 19th, across from the bookstore, is so-so, but on St. Patty’s Day its pub is swamped. And there’s always the Bier Keller near 22nd & P.

        The Elephant & Castle, near 12th & Penn, is ersatz and pricey, but good on St. Patty’s Day, with edible food. Around the corner, in the basement of the Warner Theater at 13th & E there’s a John Harvard pub. For more down to earth drinking and colleagues, there’s a bar at 14th & Rhode Island, near Whole Foods and Logan Circle. I’m sure your concierge has a more up to date list.

      • BlueStateRedHead says:

        back after a trip t- distant land and writing fr-m a lapt-p w/- the letter situated between i and p that l–ks like 0. S- bear with me if every w-rd is spelled like s-me pe-ple spell G-D. EW if y-u have can take a minute -ff fr-m defending the C-NSTITUTI-N, why and when was J-di banned? in any case, thank G-d! -r y-u.

  12. strider7 says:

    back in 2006 I was trying to find a phone carrier that wasn’t involved in all this crap and inadvertantly ran
    into a site that was looking for anyone who would
    like to get involved in a class action lawsuit against these telecoms that were illegally gathering data. Soooo
    I said sure and responded accordingly.Iwas immediatly contacted by a legal firm out of san fran and sent them all my phone bills . They comfirmed that I was involved and
    initiated the suit.we’ve come a long waysince then thanks to
    you all

  13. Neil says:

    > who will search out Beamish for me?

    We’ll form the Emptywheel Beamish Brigade. Have we a volunteer in DC that knows of an establishment that serves that fine stout?

  14. Mary says:

    6 – bmaz can give you links later, but I think that he argues they got indemnity as opposed to immunity. A little different.

    The main thing that even the House bill isn’t doing is dealing with the standing issue. Actually, this “new” resolution the House contemplates, of having information on the program provided to the court ex parte so it can review, has already happened. Judge Taylor ordered gov to make that production to her in her case and they did. She then found the program unconstitutional.

    In case anyone was wondering about that “good faith” argument Rockefeller keeps making, how anyone could have proceeded in “good faith” after the express findings of the only court to examine on the merits that the program was unconstitutional – well, you got me on that one.

    But the pieces of the House bill I’ve seen don’t seem to offer up a mechanism to deal with the standing issue (for example, a requirement of notice to anyone who was illegally surveilled if the program is ruled illegal or unconstitutional) so that they can meet the standing threshold.

  15. orionATL says:

    thanks for the coverage, ew.

    i’m glad nacchio got a new trial.

    he may well have broken some securities laws,i really have no idea, but it seems inescapable to me that he was targeted by the bush doj for not being cooperative in government eavesdropping.

    i don’t know if his lawyers will dare make this point, or if they will just stick to securities law,

    but i for one would love to know more about what the gov’t demanded of quest and others.

    if the part of the house telecom bill that allows telecom companies to introduce govt docs and justifications into the court record stays in final bill,

    maybe nacchio’s lawyers ill take the plunge into selective prosecution.

    • bmaz says:

      If the government indeed pursues the remanded case, there is no question but that Nacchio’s defense will make a run at that strategy. How far it will get is another matter and will be fascinating to watch.

      • strider7 says:

        AS I posted earlier I am a plantif in the the class action suit against the se telecoms and am rarely in contact with the attorneys. I thought I would be named as a john doe but nooooo . They named me personally . So much for discretion
        It almost feels like the “John Birch society paranoid blues”

    • earlofhuntingdon says:

      Ah, Belgian, that’s beer. Good selection at St. X’s (Antoine de Sainte-Exupery – notice the flying memorabilia) south of the U Street corridor near 14th and T (coincidentally, near “Temperance” Avenue). Pricey, busy and trendy, but good food and very good beer. Dancing downstairs is loud.

  16. JohnLopresti says:

    It is getting late. I should have answered those Take Back America emails, and attended. I found a blogger who claimed in 2007 to know of the sole remaining taproomInDC serving the writer’s Scottish and Newcastle product, but without naming the venue. Another mused it was at 713 SE 8th SE’s FMC’s, but BrandX seems to have shouldered out the amiable Cork City product at FMC.

    I appreciate the headsup about Qw’s maverick exCEO’s travails; certainly, the insider trading issue looms important from that defendant’s perspective, given the charge’s emphasis at trial. Yet, I wonder if there might be a FastForward defense in the works by his advocates, scanning in summary the scandals over backdated Options. The defenseContractor blues might afflict Nacchio’s proponents on the 4th amendment issues which have become a broad national issue, and following the SWIFT scandal, now international. The new review of his now nearly a decade-since shenanigans and business arts should be a treat for many interested companies who sell in the niche markets which embroiled his then-smallest of remnant parentTelco fragments; he tried to scale Qw’s growth throughout, facing some much more diversified companies than his could manage to be within the realistic prospective timespan of the rise of financials as the consumer business consolidated. Got to read some ancillary resources to contribute much else substantive.

  17. Sedgequill says:

    From the linked AP article:

    Mahoney argued in court briefs that Nacchio’s stock sales were not based on nonpublic information and that he had announced his decision to sell shares well in advance.

    One would suppose that Mahoney could come up with a memo or an email or a witness or something that would prove such an announcement was made. Then again, after Nacchio’s loss of executive control of the company, that might not be so easy. I guess.

    • bmaz says:

      Scenes We Would Like To See: Nacchio takes the stand and says “I had no improper knowledge, nor intent, in relation to Qwest and the stock transfers at issue; but I thought the industry was in for a rough ride because of the illegal things that the Bush Administration was demanding be done by it. I just couldn’t participate in such unconstitutional and outright criminal behavior, even as a stockholder”. Is that what you all want for St. Patrick’s Day?

    • earlofhuntingdon says:

      I didn’t follow the original trial, so some of this may be old news or incorrect, but in general:

      In a company the size of QWEST, there should have been standing rules, promulgated by its inside SEC or General Counsel, that applied to all sales of company stock by senior officers and directors. Those should be available, and Nacchio and his lawyers should have copies of them.

      CEO’s are presumed to have knowledge unavailable to outsiders, making trades in company stock problematic for them at any time. Internal rules are set up to avoid problems with insider trading. They usually establish a “safe harbor” period – normally a few days after filing quarterly and annual reports, when the market is presumed to know as much as an insider – in which sales are permitted. Sales outside of a safe harbor period sometimes specifically require prior notice to the GC and his or her approval. All sales, whenever made, have to be reported within a short time.

      If these procedures existed at QWEST, and they should have, it should be easy to establish whether Nacchio made trades consistent with them. If he did, that should make the Fed’s job harder. If he didn’t, he has a harder time proving his case.

      • bmaz says:

        Whatever policies Qwest has are between him and Qwest, and are irrelevant to any criminal charges. If the stock is not restricted, and the government cannot establish an illegal intent or knowledge, why should he not have the same rights and abilities as any other similarly situated stockholder? He may be entitled to more scrutiny, but is he due any lower level of protection and equal protection of rights under the law? Is he some unspecified underclass above and beyond what is contained in the Federal criminal statutes?

        • earlofhuntingdon says:

          I must be confused; I understood that one of the issues at his trial related to insider trading. If not, my bad. If it did, the policies, if any, would would only be some evidence, but not dispositive, related to that. Obviously, I think he should have the same rights as Don Siegelman or Karl Rove, no more, no less.

          • bmaz says:

            Oh, no, that is an issue. I just don’t see why the potential internal company rules have any bearing on whether his conduct violates federal law. What Qwest internal contractual policies contemplate should not be admissible for any purpose of determining guilt or innocence under Federal Criminal Statutes. Qwest does not determine thresholds of culpability for Federal crimes. It should not be an argument that he is innocent if his company had no standards, and therefore he violated none; it should not be an argument that he is guilty because the company had some arbitrary standard that he did violate. Guilt or innocence is to be determined by the law; not a corporate contract.

  18. Mary says:

    29 – I’m sorry your privacy and personal security were jeopardized by naming you personally and it sounds like there was some kind of a glitch. But it’s a pretty damn admirable thing that you were willing to be a plaintiff and I’d like to say I appreciate what you brought to the table.

    33 – Yes.

    • bmaz says:

      Heh, well, I’d have no compunction in saying that was the plan all along and do just that if I were involved. But only after checking the record to make sure that there is no direct contraindication extant. Maybe. That is a much more ballsy and complication fraught tact than most realize though. For starters, you have to put Nacchio in the chair to prove it up. In addition to all the normal avenues to horror that presents, you would have to worry about the government popping up like an evil jack-in-the-box at the critical moment with some “insta-declassified” treated-as-top-secret memo from the Cheney-Addington Branch. Scary. I would have two prong probing discovery request set ready to go for the day they filed; one prong for everything that could be asked for, and one prong for specific documents that I knew existed and knew where they were located (in other court files, in Congressional files, the Fourth Branch Energy Files etc.) whatever would drive them nuts but be so obvious and previously identified as to pretty much have to be produced right away. And then wait for them to start pitching the same tripe they have been for the last six plus years. These guys only run one offense, and they tend to predictably lock onto designated receivers. Other than the pixie dust possibility, they can be game planned. I bet Belichick has tape….

  19. JohnLopresti says:

    I think the hornets the industry sailed toward DenverQw had to do with forward looking statements as in the prospecti; and the Cupertino nickel defense might raise an eyebrow, congress even has held hearings recently on the penchant for many companies to create some early dates for exercising options, one of the common perqs CEOs of large companies in that tumultous time; but retroactivity under Sarbanes-Oxley likely is a nonStarter.

    Theresa Payton can proceed in parallel, with the emergency tapes restoration, as soon as OCIO is awarded the 0.5 MM USD server as a workspace, for pertinent missives sent after 2003, but if there are immediately postMillenium files TreatedAsIf didactic, that might be an interesting compilation homework to elaborate listwise now, I agree. I wonder if .pst files might continue to disappear even since the migration is complete; the impression from the declaration of that executive office’s CIO seemed to be no, the doubly redundant backup is not implemented even yet, though I would need to read it again. The pre2003 material would be in the Notes archive, somewhere; and I wonder about internal attached documents in Notes.

  20. pdaly says:

    New trial. Yeah. I am hoping, as noted by others above, that Nacchio takes the opportunity to address the illegal wiretapping/datamining by the Bush administration both pre-9/11 and post–even if it is tangential to his defense.

    Given the rise in oil prices, I found this article at HowStuffWorks somewhat reassuring. Has anyone heard of the Aptera hybrid car/3-wheeled motorcycle, which achieves more than 200 miles per gallon?!

    The money quote:
    “The initial prototype of the Aptera achieved 230 mpg, a number that is 195 mpg over the projected standard outlined in President Bush’s recent energy bill. As of now, the developers still have more time to work out the kinks and improve its efficiency — [Accelerated Composites] expects the Aptera to be ready for Californians in late 2008.”

    • MarieRoget says:

      You’re very welcome. It’s been a tough day all ’round, & personally I’m beat, but watching & listening to Charlie Lennon cheered me up, so thought I’d share.

      Must hit the hay now- early to the office tomorrow.

    • bmaz says:

      Heh heh, “Federal Judge is pompous intemperate ass” is, um, shall we say, not exactly an unusual or new story. The ticky tack stuff in that story by reporter Lewis doesn’t even put Naughtyham in the big leagues of intemperate pompous ass federal judges. I have heard he was a bear in the Nacchio trial, but you’re going to need more than than a fleeting “69″ joke to make the case. A month long heated criminal trial is a war of sorts, it is the kind of setting where big boys and, occasionally, girls play; it is not for the meek. If a trial attorney heard that crack and did anything but chuckle and move on, they probably shouldn’t be in that courtroom. Now, that statement I just made may shock those with sensitive ears and conscience, and perhaps rightfully so; but from what I’ve seen, it is a fact.

  21. cboldt says:

    The Fourth amendment issue is dead, in Nacchio’s trial. Here is the complete appellate court treatment of the “I should be permitted to introduce evidence of a broken deal with the government” grounds for appeal. Three paragraphs in total, out of 60 pages of majority opinion.

    Mr. Nacchio also argues that the district court was wrong to prevent him from presenting certain classified information as evidence at trial. He claims that the evidence would have shown that he personally had reason to believe that Qwest’s economic prospects were much better than others realized. Thus, he says, this evidence should have been permitted both to show that he did not have material information and to negate scienter. We affirm the district court’s decision, because even if the classified information were presented and established what he said it would, it could not exonerate Mr. Nacchio as he claims.

    Essentially, Mr. Nacchio argues that undisclosed positive information can be used as a defense to a charge of trading on undisclosed negative information. We disagree. If an insider has material information that he cannot disclose because it is confidential or proprietary, then he must abstain from trading. That is the lesson of In re Cady, Roberts & Co., Exchange Act Release No. 6,668, 40 S.E.C. 907, 911 (1961), later applied in SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 848, 850 n.12 (2d Cir. 1968), and Chiarella v. United States, 445 U.S. 222, 226­-29 (1980). It is black-letter law that insiders must disclose their material information or else abstain.

    It is true that in cases like Texas Gulf Sulphur, insiders were trading in bullish positions ahead of the disclosure of the company’s proprietary discovery, and thus their trading correlated with the inside information, while here Mr. Nacchio argues that his possession of classified information neutralizes his possession of other inside information. However, the general rule applies. If an insider trades on the basis of his perception of the net effect of two bits of material undisclosed information, he has violated the law in two respects, not none.

  22. perris says:

    I am very disturbed the seigleman story has fallen below the radar, I have read the man is getting beaten as well

    why is he still encarcerated?

    why is there no blog swarm?

    we have to do something

    seigleman is the cog that will bring this administration down, he is the cog that will get rove charged, and he is a man in jail because he won an election

    we have to do something

  23. Tortoise says:

    Surely there is a logical flaw in the appeals court opinion? The “undisclosed positive information” was not material at the time of the alleged illegal trading. It only became relevant (as exculpatory evidence) after Nacchio was charged. There is nothing to suggest that Nacchio engaged in insider trading on the basis of this piece of information (if that is the test?). If it was not material at the time of the trade, the “general rule” presumably did not apply then, and therefore it should not apply now either. Is this incorrect, or too simple an analysis?

    (In my defense, I’m just a scientist, so I probably put too much stock in a logic-based argument).

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