If Joe Nacchio is convicted, the entire case may come down to one well-prepared lawyer and a single key suggestion.
One of the critical issues in this case is whether Nacchio gave instructions to sell certain shares in November or sometime in December 2000. If it was in November, the order occurred before the government alleges Nacchio had inside information. If in December, the government alleges that he had inside information then. So the date matters.
Much of the issue turns upon a written document that contains an irrevocable election to sell the shares. The document is dated Nov. 3 but the government contends that it was executed sometime in December and backdated.
When David Weinstein, a financial adviser for Nacchio, testified last week, the topic of the backdated document came up. Weinstein testified about a conversation he had with Mr. Nacchio in December where his notes indicated that Nacchio was signing the document “now,” that is in December. The testimony suggested that Nacchio had in fact backdated.
In response, the defense wanted to introduce yet another document, another memorandum by Weinstein in December about a conversation with an attorney in Qwest, Yash Rana. Weinstein recorded that he was told by Rana that “Joe previously made an irrevocable election to sell his shares during the last window period (in November) and according to their legal counsel, this qualifies for an exemption for the insider trading rules.” In short, the memorandum indicated that Nacchio had not backdated.
U.S. District Judge Edward Nottingham refused and the second memorandum wasn’t admitted. The defense petitioned the judge to reconsider, not something Nottingham has done very often in this case. In a bit of surprise, Nottingham reversed himself and ordered the memorandum admitted. It was required, he reasoned, by notions of due process and fairness.
A significant blow
It was a damaging, even unexpected, blow to the government’s case. In this trial, “unexpected” rulings have sometimes thrown the lawyers into disarray. When Nottingham ruled later that same day that Daniel Fischel, a witness for the defense, could not testify as an expert, the defense seemed decidedly unprepared for the exigency.
Not this time, though. Cliff Stricklin, lead counsel for the government, anticipated the ruling. He had a simple but elegant solution.
“Your honor, on the issue of notice and timing, I put some thought to this last night, kind of anticipating where the court may end up.”
“And the way that I would propose handling this would be, instead of just receiving this document and then instructing the jury … I think the way to resolve this is to require the defense recall Mr. Weinstein and ask him about that document and offer it through Mr. Weinstein. ”
Nottingham readily agreed. The document could come in but only if Weinstein came back and testified. The defense objected, but it was too late. Nottingham was not going to change his mind. And, with the defense refusing to call Weinstein, the government would do it, along with one other witness, Rick Olson, Nacchio’s former broker, to testify on the subject.
Getting the last word
These would be the last witnesses the jury would hear before deliberations. The government would have the last word, and the last word would be about backdating.
Weinstein’s testimony was exactly what the government had hoped. Clear and direct, he repeated his view that Nacchio told him the instructions were signed “now,” that is in December. It was reinforced by the memorandum appearing on the screen, in full view of the jury: “Joe is signing an irrevocable election to sell the shares now and that is why he can sell the shares during a nonwindow period.” Despite a valiant effort at cross, the testimony went largely unchallenged.
And that wasn’t all. Some ninety minutes later, Colleen Conry, counsel for the government, in the closing argument, put the memorandum back on the screen for the jury to study for a second time in the same day and reminded the jury that it was written by Nacchio’s “most trusted adviser.”
The impact on the jury? Perhaps defense lawyer Herbert Stern summed it up best in his closing when he noted that Weinstein is “no friend of ours.”
It gave the government a strong finish, and it might not have happened. It occurred entirely because Stricklin came prepared, a solution ready to be offered if he lost the motion. He lost the motion but as a result may have won the case. It was an example of very good lawyering, indeed.
Jay Brown, a law professor at the University of Denver, and his students address corporate governance issues in a blog, www.theracetothebottom.org.
