Nacchio Tea Leaves

Former Qwest CEO Joe Nacchio argued in late July that he should be freed pending an appeal of his six year prison sentence for securities fraud.According to the Rocky Moutain News:

The 59-page motion asserted there are “substantial issues” for appeal based on jury instructions, the evidence itself, the exclusion of expert testimony and the judge’s decision to limit Nacchio’s classified-information defense.

Judge Nottingham didn’t agree.  But, yesterday, the 10th Circuit Court of Appeals granted Nacchio’s request to be freed pending appeal and having the case placed on the fast track on the docket, without stating its reasoning.  He is free on a $2 million bond.  We’re left to read the tea leaves and puzzle out what this means.

Most importantly, the 10th Circuit’s ruling means that the panel believes that Nacchio has raised some credible issues on appeal with a real chance of success. 

The relevant statute governing the 10th Circuit’s decision states that to permit pretrial release the following have to be true:

(A) by clear and convincing evidence that the person is not likely to flee or pose a danger to the safety of any other person or the community if released under section 3142 (b) or (c) of this title; and

(B) that the appeal is not for the purpose of delay and raises a substantial question of law or fact likely to result in-
(i) reversal,
(ii) an order for a new trial,
(iii) a sentence that does not include a term of imprisonment, or
(iv) a reduced sentence to a term of imprisonment less than the total of the time already served plus the expected duration of the appeal process.

Nobody has ever claimed that Nacchio is a flight risk, or someone likely to commit further crimes while released.  But, since release on appeal after a conviction and sentencing is the exception, rather than the rule, the decision does send a strong signal.  Notably, a similar attempt by Scooter Libby failed, precipitating President Bush’s most famous commutation of a criminal sentence in his career.

The question then is what issue Nacchio has raised on appeal pertaining to his prison sentence or conviction so compelling in the eyes of the appellate judges.

Peter J. Henning, Professor of Law at the Wayne State University Law School, notes at the White Collar Crime Prof Blog that:

While the panel’s decision does not mean the conviction will be reversed, it does indicate that there is enough there to trigger a higher measure of scrutiny of the appellate issues, including Judge Nottingham’s exclusion of classified information and his instructions on the materiality of the inside information.

As a general rule, jury instructions are easier to appeal, because they are reviewed without deferrence to the trial judge’s ruling, while evidence rulings are generally reviewed for an abuse of discretion, and also undergo searching “harmless error” analysis to see if the ruling likely made a difference in the result, even if it was erroroneous.

Also notably, the decisions put the case on a fast track with oral arguments scheduled for mid-December 2007.  Clearly, special treatment for CEOs extends well past their tenure, although one could charitably believe that the Enron experience of a major CEO defendant dying before a conviction, or a desire to speed up distribution of fine and asset forfeiture distributions could become final could have an impact on the fast track ruling.  Courts have wide discretion to modify procedural deadlines in their proceedings for a variety of reasons.

Once oral arguments are heard in December, there is no telling how long it will take the 10th Circuit to rule.  There have been rare occassions where appellate courts have ruled from the bench reversing trial court decisions, at the close of oral arguments (a scenario would would exonerate Nacchio in time for Christmas).  While this is unlikely, even in this case, a prompt ruling would normally be expected in a case where the appellate court has asked for an expedited briefing schedule.

It also isn’t unheard of for appellate courts to take years to hammer out of ruling on the merits.  A decision concerning Colorado’s campaign finance rules also rendered yesteday by the 10th Circuit, was filed in early 2005.

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