EvidenceProf Blog

Editor: Colin Miller
Univ. of South Carolina School of Law

Wednesday, March 19, 2008

Vision Qwest: Tenth Circuit Reverses Joseph Nacchio's Convcitions Based Upon Improper Exclusion Of Expert Testimony

The Tenth Circuit has reversed the nineteen insider trader convictions of former Qwest Communications chief executive Joseph P. Nacchio based upon incorrect expert evidence rulings.  Anyone who has followed the situation at Qwest is likely familiar with the saga of Nacchio, who was accused of knowingly concealing Qwest's mounting financial troubles from investors, while simultaneously selling millions in personal shares.  Of course, there was significant evidence of Nacchio's guilt, leading to him being convicted, sentenced to a significant term of incarceration, fined $19 million, and ordered to forfeit $52 million more.  So, what went wrong?

Well, on March 16, 2007, the defense disclosed its intention to call Professor Daniel Fischel to provide economic analysis of Mr. Nacchio's trading patterns, and to testify about the economic importance of the allegedly material inside information.  The government objected that defense failed to comply with Federal Rule of Criminal Procedure 16(b)(1)(C), which indicates in relevant part that "[t]he defendant must, at the government's request, give to the government a written summary of any testimony that the defendant intends to use under Rules 702, 703, or 705 of the Federal Rules of Evidence....This summary must describe the witness's opinions, the bases and reasons for those opinions, and the witness's qualifications."

On March 29, Nacchio filed a revised, ten-page Rule 16 disclosure describing Professor Fischel's qualifications as an academic, his research and teaching in law and finance, and his previous experience consulting and testifying. It gave a “Summary of Opinions and Bases for Opinions,” explained that Fischel had conducted a “study of the Questioned Sales in relation to various benchmarks,” and provided his consequent opinion that Mr. Nacchio's sales were inconsistent with what one would expect them to be if the government's claims were true.  It recounted that Professor Fischel had studied stock data and assorted public information and stock analysis and had concluded that Qwest's stock price was not significantly affected when the allegedly material information was released.  The government again objected, and at trial, the judge granted the objection and precluded Professor Fischel from testifying, concluding that defense's Rule 16 disclosure failed to address methodology and that Fischel's testimony would not be helpful to the jury, making it inadmissible under Federal Rule of Evidence 403 or Federal Rule of Evidence 702.

In United States v. Nacchio, 2008 WL 697382 (10th Cir. 2008), the Tenth Circuit found that the judge erred in precluding Professor Fischel's testimony.  The Tenth Circuit first found that the judge's Rule 16 ruling was in error, possibly because he was "confus[ed] between" the Federal Rules of Criminal Procedure and the Federal Rules of Civil Procedure because he indicated that "the criminal expert disclosure requirement is 'pretty close to what is required in the civil area.'"  As noted, a disclosure under Federal Rule of Criminal Procedure 16(b)(1)(C) must contain only "a written summary of any testimony" and  "describe the witness's opinions, the bases and reasons for those opinions, and the witness's qualifications."  The Tenth Circuit found that the defense's ten-page Rule 16 disclosure satisfied this requirement.

The Tenth Circuit then noted that in civil cases, Federal Rule of Civil Procedure 26 requires that a party presenting expert testimony produce an expert's written report with "a complete statement of all opinions the witness will express and the basis and reasons for them," the witness' qualifications, all of the data or other information considered in forming the opinion, all summary or supporting exhibits, and the compensation he was paid.  The defense did not comply with the this rule, but because it was a criminal case, not a civil case, compliance was not required, and the trial judge's determination was in error.

The Tenth Circuit then noted that the trial judge found that, even if the defense's Rule 16 disclosure was proper, Professor Fischel's still would have violated Federal Rule of Evidence 403 or Federal Rule of Evidence 702.  The court, however, found that after the trial judge made his Rule 16 decision, he merely cursorily made these conclusions without the required factual analysis.  Thus the Tenth Circuit reversed and ordered a new trial.  While it is unfortunate that convictions supported by substantial evidence were overturned, it seems to me that the Tenth Circuit had no other choice based upon the clearly erroneous evidentiary rulings by the trial judge.    



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