DENVER—Former Qwest Communications chief Joe Nacchio claimed in a bid to overturn his insider trading conviction the trial judge erroneously excluded evidence about the telecommunications company’s secret government business dealings.
Attorney Maureen Mahoney, who represents Nacchio, also argued the evidence against Nacchio was insufficient, his expert defense witness was erroneously denied the chance to testify and the jury received improper instructions.
In a 58-page appeal brief obtained Wednesday from Mahoney’s office, she called Nacchio’s case an “unprecedented prosecution,” arguing there are no other cases where a criminal insider trading charge has been based on financial predictions for future quarters.
“The prosecution yoked an unprecedented theory to plainly insufficient facts, and hoped, in a bitter and vindictive atmosphere, that it would be enough to win a conviction from a Denver jury,” Mahoney wrote in the court brief filed late Tuesday but was not made available to the public until Wednesday.
Nacchio was convicted in April of 19 counts of insider trading after a jury concluded he sold $52 million worth of stock when he knew Qwest Communications International Inc. was at financial risk but he didn’t tell investors. The jury acquitted Nacchio of 23 counts.
Nacchio has been sentenced to prison for six years but remains free on bail pending the outcome of his appeal. The 10th U.S. Circuit Court of Appeals has given prosecutors a month to respond to Nacchio’s claims and scheduled oral arguments Dec. 18.
The case was based on 2001 stock transactions when prosecutors said Nacchio lied to investors while selling his shares as the Denver-based company battled aggressive competition in a weakening economy.
Defense attorneys insisted Nacchio set higher internal financial projections to push executives into performing better. Several business unit managers testified they were concerned Qwest would be unable to meet those internal revenue targets.
Courts have ruled previously if a company has a good-faith basis for its public financial projections, then undisclosed risks relating to those projections are “immaterial as a matter of law,” Mahoney wrote.
Nacchio earlier said part of his defense would revolve around classified government contracts he expected Qwest to receive which made him more optimistic about its future. That evidence was not introduced at trial.
The contracts for work at clandestine agencies fall under a federal law requiring such information to remain out of the public’s eye for security reasons so decisions about those were withheld from the public.
The case grew out of a multibillion-dollar scandal that forced Qwest to restate $2.2 billion of revenue. Federal regulators have said Qwest falsely reported fiber-optic capacity sales as recurring instead of one-time revenue between April 1999 and March 2002, a practice that allowed it to improperly report about $3 billion in revenue.
Qwest stock plummeted from more than $60 a share in 2000 to just $2 a share in 2002 and its near-collapse left thousands of pensioners in financial straits.
A civil fraud lawsuit is still pending against Nacchio and four other one-time Qwest executives, alleging they orchestrated financial fraud that led to the scandal. The Securities and Exchange Commission is seeking repayment and civil penalties, with the amounts to be determined at trial.
