Wednesday, May 3, 2006

Former Qwest CEO Once Again Seeks Dismissal of Insider Trading Charges

Former Qwest CEO Joseph Nacchio's attorney have sought dismissal of the 42 insider trading charges on the ground that venue is not proper in Colorado and prosecutorial misconduct.  An earlier motion to dismiss  because the indictment failed to charge a criminal offense failed, and these motions do not deal with the substance of the charges but the process of the indictment and its location.  According to an AP story (here), Nacchio alleges that prosecutors tainted the grand jury by having other Qwest executives testify regarding internal corporate policies on selling shares, and only six witnesses testified before the grand jury in a rush to secure an indictment before the five-year statute of limitations expired.  The problem with this argument is that under U.S. v. Costello, 350 U.S. 359 (1956), a facially valid indictment cannot be dismissed because of the quality or sufficiency of the evidence before the grand jury.  It will be difficult for Nacchio to show that the grand jury process was so tainted by prosecutors that the grand jury's function was usurped, so an evidentiary claim is unlikely to succeed even when coupled with a claim of prosecutorial misconduct. 

The second motion to dismiss is based on the ground that none of the stock sales took place in Colorado, so venue is not proper in that jurisdiction.  The securities fraud statute is not quite so restrictive, however, and covers any scheme or artifice to defraud "in connection with the purchase or sale of a security."  The fact that Nacchio was a Qwest executive in Colorado at the time of the alleged insider trading is likely sufficient to establish venue, and to the extent he wishes to raise a factual issue on this element then it is a jury question and not one the judge is likely to decide before trial.  As an alternative, Nacchio also requests a change of venue because he is "among the most reviled figures in recent Denver history."  While I thought Jake Plummer would rank as #1 on that list these days, the issue for the court is whether Nacchio can receive a fair trial and not the general perception of him.  Once again, this is a difficult argument to win, and the trial is likely to be held in Denver, the site of Qwest's headquarters. An AP story (here) discusses the venue issues. (ph)

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