Corporate Governance

Nacchio v. US: An Update (The Race to the Bottom Makes an Appearance)

By J. Robert Brown

We are in the middle of the "director compensation project," a series of posts exclusively by students who show the amount of compensation paid to directors and the amount of compensation to the CEO (including perks).  Is there a relationship?  You decide.

In the meantime, we take a moment to provide an update on the conviction of Joe Nacchio.  Of particular interest, one of the judges on the Tenth Circuit, Mike McConnell, announced he was resigning and taking a position at Stanford.  Judge McConnell wrote the majority opinion in the Nacchio appeal, reversing the conviction, a decision that was ultimately overturned by the court en banc (with McConnell writing a vigorous dissent).  The motive for the change is unclear, although there are many possibilities (pay, regime change and the reduced possibility of a Supreme Court appointment). 

It is the case, however, that for most judges (the Delaware courts excepted), positions on the federal bench largely limit their ability to weigh in on the important legal issues of the moment out of concern over the appearance of bias or prejudgment.  Judge McConnell will have a much less constrained position as Professor.

At the Supreme Court, a series of amicus briefs have been filed on behalf of Nacchio.  Some of them are posted on the DU Corporate Governance web site.  They were filed by the Chamber of Commerce, the National Association of Criminal Defense Lawyers, and the Washington Legal Foundation, all of whom filed briefs in the lower courts.  We note that in one of the briefs, The Race to the Bottom, made a guest appearance.  In the brief filed by the National Association of Defense Lawyers and the New York Council of Defense Lawyers.  According to the brief:

• Even detractors of such testimony observe that the Tenth Circuit in this case has perhaps written 'the final chapter in the era of excessive deference to economic analysis.' J. Robert Brown, U.S. v. Nacchio: The Death Knell for Special Treatment of Economic Analysis in Securities Cases?, TheRacetotheBottom.org, Feb. 26, 2009, http://www.theracetothebottom.org/nacchiotrial/us-v-nacchio-the-death-knell-for-specialtreatment-of-econom.html.

The government has until May 22 to file its response. 

In the district court, Nacchio has requested a new trial based upon evidence obtained in the civil action brought by the SEC.  He has requested a hearing.  The government has opposed the request for a new trial.

Full post as published by The Race to the Bottom on May 11, 2009 (boomark / email).