Qwest Communications' former Chief Executive Joseph Nacchio, who was sentenced last summer to six years in prison for insider trading, is getting a new trial.
On Monday, the U.S. 10th Circuit Court of Appeals overturned the 19 guilty verdicts and ordered a new trial for Nacchio stating that the trial judge had improperly limited testimony from an expert witness and excluded classified evidence, which could have been used in Nacchio's defense.
Nacchio, who served as the phone company's CEO from 1997 until 2002, was convicted in April last year on 19 of 42 counts of insider trading. Prosecutors said that Nacchio had profited from selling $101 million worth of Qwest shares after company insiders had told him the company could not meet financial targets. In July, he was sentenced to six years in federal prison. He was fined $19 million and ordered to forfeit $52 million.
The government has argued that Nacchio knew Qwest was in financial trouble, while presenting a much rosier scenario to shareholders and analysts before he sold his own shares in the company.
Nacchio appealed his conviction in October. And his lawyers argued that what he knew about the company's finances when he sold his stock wasn't "material" information that required disclosure to investors. According to one of Nacchio's lawyers, the judge limited the testimony of an expert witness and also rejected classified evidence that was important in Nacchio's defense.
Nacchio's lawyer argued that he was upbeat about the company's prospects during this period because he knew of impending lucrative, secret contracts with the government. The judge in the trial barred some parts of the classified defense, and the issue was barely discussed in the trial.