A U.S. appeals court on Monday threw out all guilty verdicts against former Qwest Communications Chief Executive Joseph Nacchio, ordering a new trial in an insider trading case seen as a test of government attempts to squash corporate fraud.
The 10th U.S. Circuit Court of Appeals in Denver voted 2-1 to overturn all 19 guilty counts and ordered a new trial in front of a new judge, saying that Judge Edward Nottingham had improperly excluded an expert witness ready to testify for Nacchio.
In April, a Denver federal jury found Nacchio guilty of 19 of 42 counts of insider trading. Prosecutors had accused him of unloading $101 million of Qwest shares after company insiders warned him that the phone carrier could not meet its financial targets.
Nacchio was sentenced by Nottingham in July to a 6-year prison term, fined $19 million and ordered to forfeit $52 million. The appeals court in August allowed Nacchio to remain free on bail pending the outcome of his appeal.
Nacchio's lead counsel, Maureen Mahoney, could not immediately be reached for comment on Monday's ruling.
In her appeal, Mahoney had called the case "an unprecedented prosecution'' in asking for Nacchio's conviction to be overturned and a new judge be appointed.
"The extraordinary charges here are based on the claim that Nacchio knew, eight months or more in advance, that Qwest might not make its year-end 2001 financial projections,'' she wrote in the appeals brief. "Counsel is aware of no other case where the government has predicated a criminal charge of insider trading on predictions about financial results for future quarters.''
She asked that the appeals court assign a new judge for a retrial because Nottingham "had expressed disapproval'' of the defendant and his attorneys.
Denver-based Qwest became the target of federal prosecutors and U.S. regulators in 2002 after it restated $2.2 billion in revenue for the previous two years. Nacchio was CEO from 1997 to 2002.