Thursday, April 12, 2007
The prosecution of former Qwest CEO Joseph Nacchio heads into its final phase, at least for the guilt portion of the proceedings, as the jury will receive the case and begin its deliberations on the 42 counts of insider trading. The defense put on only three witness, adjuring having Nacchio testify or presenting any evidence of the secret national security contracts that had been touted before trial as a basis for his positive outlook on the company before its stock collapsed. The Race to the Bottom blog (here) , sponsored by the University of Denver Sturm College of Law, has by far the best coverage of the trial, with outstanding summaries and analysis of the closing arguments. The posts are especially good at providing perspective on how the lawyers for each side framed their cases that, in the end, revolve around a determination of what exactly was in Nacchio's mind in 2001 when he sold shares valued at over $100 million.
Like any prosecution, the outcome will cause one side or the other to be second-guessed. If the jury convicts, then the decision not to put Nacchio on the witness stand will be the first strategic decision questioned. Some will also ask whether a guilty verdict is more a judgment on a CEO who made an almost obscene amount of money while ordinary investors lost 98% of their stock value (measured from the peak, of course) and numerous employees lost jobs when Qwest had to make layoffs due to financial problems exacerbated by accounting problems. Nacchio sought a change of venue before trial because he claimed that he was the most vilified man in Denver -- something former Broncos QB Jake Plummer might argue. If the jury returns a not guilty verdict, then the government's strategy of charging a narrow insider trading case without any "smoking gun" evidence of what was in Nacchio's mind will call into question whether the government was motivated by a desire to bring another high-profile CEO prosecution based on shaky evidence for the sake of the headlines. The whole "criminalization of agency costs" discussion will be resurrected -- although that's not dependent on a not guilty verdict -- to question whether the decisions of executives should be the subject of criminal cases. If the jury deadlocks and a mistrial is declared . . . well, maybe it's better not to think about that one right now. An AP story (here) discusses the case as it heads to the jury. (ph)