DENVER—A federal appeals court agreed Wednesday to review a decision that overturned the insider trading conviction of former Qwest CEO Joe Nacchio, a victory for prosecutors in the long-running court battle.
Nacchio was convicted in April 2007 of 19 insider trading counts. Prosecutors argued he illegally sold $52 million worth of stock at a time when he knew Qwest Communications International Inc. was at risk while other investors did not.
In March, a three-judge panel of the 10th U.S. Circuit Court of Appeals overturned Nacchio’s conviction and ordered a new trial, concluding the trial judge improperly barred testimony from a defense witness.
On Wednesday, the full appeals court granted prosecutors’ request to review that decision. The full 10th Circuit typically is 12 judges.
“Neither the panel’s original ruling nor today’s decision was a surprise to me,” U.S. Attorney Troy Eid said in a written statement. “We respect the appellate process and will keep working to ensure that justice is done.”
Nacchio’s attorneys did not immediately return a call.
Nacchio was sentenced to six years in prison but remains free on appeal. Jurors acquitted him of 23 counts.
The three-judge panel’s ruling came on a 2-1 vote. It said U.S. District Court Judge Edward Nottingham, the trial judge, wrongly prevented defense witness Daniel Fischel from testifying.
Fischel is an expert on corporate law and markets. Nacchio’s attorneys said he could have explained to jurors the legal requirements for public disclosure, and that Nacchio’s stock sales were to diversify his portfolio.
Prosecutors said the defense didn’t establish the reliability of Fischel’s opinions or disclose how he arrived at them.
In its order Wednesday, the full court told both sides to submit written arguments on four questions, including whether Nottingham abused his discretion by barring Fischel’s testimony, and if he did, whether it would take a new trial to correct the error.
Oral arguments were scheduled for Sept. 24.
The case against Nacchio grew out of a multibillion-dollar scandal that forced the Denver-based telecom 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.
The stock sales involved in Nacchio’s conviction came before Qwest shares plummeted.
Nacchio maintained he was optimistic about the company’s future because he knew of potential contracts the company could land from secret government agencies. He did not present that argument during his trial.
Eid has called the case the largest insider trading prosecution in the nation based on the number of counts, the amount of money involved and the length of the prison term handed down.
Qwest is the primary telephone provider in 14 mostly Western states and operates a fiber optics network.
