Corporate Governance

Kicking Off Coverage of the Joe Nacchio Resentencing Hearings

By Daniel Snare

Last Thursday, counsel for former Qwest CEO Joseph P. Nacchio ('Nacchio'), and for the U.S. Attorney's Office, appeared in the United States District Court for the District of Colorado before the Honorable Judge Kreiger to begin the process of resentencing.  A full post discussing the actions of Judge Kreiger will be forthcoming shortly.   

The Race to the Bottom provided continuing coverage of the criminal trial.  Since Nacchio's conviction, this blog covered the Tenth Circuit appeal overturning his conviction, the replacement of Judge Nottingham, the en banc rehearing to reinstate his original sentence, Nacchio's petition for certiorari to the Supreme Court, and the dismissal by the District Court of Nacchio's motion for a New Trial based on new evidence. 

We have also extensively covered the Tenth Circuit's opinion regarding 'disgorgement,' and the calculation of Nacchio's gain in connection with his insider trading; you can read about it here. 

To briefly summarize, however, the primary issue on appeal was what method to use to measure the gain Nacchio received as a result of insider trading activities.  The 10^th Circuit adopted an approach to compute 'gain' under the Federal Sentencing Guidelines that conflicted with the Eighth Circuit.  The 10^th Circuit stated that their economic approach would (1) 'take into account that Mr. Nacchio's offense did not inhere in his sale of the shares itself, but in the deception intertwined with the sales due to his possession of insider knowledge, and (2) that consequently would endeavor to compute his gain for sentencing purposes based upon the gain resulting from that deception.'  U.S. v. Nacchio, 573 F.3d 1062, 1072 (10^th Cir. 2009).  The court then concluded that the civil disgorgement remedy provides an appropriate 'guidepost' for computing how much of the gain is attributable to the 'deception' of insider trading.

However, as seen in Judge Kreiger's courtroom yesterday, using the disgorgement standard as a guidepost is not an easy matter. Both sides have have produced thousands of pages of evidence in addition to complicated expert reports.  Judge Kreiger set an evidentiary hearing for April 21-22 to address the expert reports for calculating gain.  

We look forward to keeping you apprised of step-by-step developments in the ongoing saga of the Ex-Qwest CEO. 

The primary materials in this case can be found at the DU Corporate Governance web site.    

Full post as published by The Race to the Bottom on February 22, 2010 (boomark / email).