UPDATE 3-U.S. appeals court upholds Nacchio conviction
* Ex-Qwest CEO's 6-year prison term reinstated
* Court rules 5-4 affirming insider trading conviction
* Revokes Nacchio's release on $2 million bond
* Finds expert testimony was properly excluded (Adds defense attorney statement)
By Robert Boczkiewicz and Gina Keating
DENVER/LOS ANGELES, Feb 25 (Reuters) - A U.S. appeals court affirmed the insider trading conviction of former Qwest Communications International Inc (Q.N) Chief Executive Joseph Nacchio, finding that a trial court properly excluded expert witness testimony that Nacchio deemed crucial to his case.
The 5-4 decision by the full 10th U.S. Circuit Court of Appeals reinstates Nacchio's conviction and his six-year prison sentence and revokes his release on $2 million bond.
Acting U.S. Attorney David Gaouette said in a statement that the opinion "reaffirms what the government has believed from the beginning, that the jury verdict finding Mr. Nacchio guilty was indeed correct."
Nacchio's attorney Maureen Mahoney said the defense team was "profoundly disappointed" by the opinion and will ask the U.S. Supreme Court to review the case.
"Not only was the court intensely divided, with four of the nine judges concluding that Mr. Nacchio was denied a fair trial, but the majority's decision is in conflict with the decisions of other courts of appeal throughout the country," Mahoney, of Latham & Watkins, said in a statement.
A three-judge panel of the same court last year voided Nacchio's conviction and ordered a new trial, finding that U.S. District Judge Edward Notthingham had wrongly barred consultant Daniel Fischel from testifying at trial as an expert witness.
Fischel was prepared to present a study of Nacchio's trading patterns that showed they were inconsistent with insider trading.
But the majority noted on Wednesday that Nacchio's attorneys first disclosed plans to call Fischel three days before the start of trial, giving the government inadequate time to review Fischel's qualifications and opinions.
"The district court's exclusion of the testimony was not arbitrary, capricious, whimsical, or manifestly unreasonable; nor are we convinced that the district court made a clear error of judgment," the majority justices wrote.
Dissenting justices argued that defense attorneys should not have been penalized for "an understandable and inconsequential mistake."
"Not every violation of procedural rules warrants the nuclear option of disallowing the defense to present its case," the dissenters wrote.
The majority remanded the case to the original three-judge appeals panel to hear Nacchio's challenges to the length of his sentence and the $52 million forfeiture and $19 million in fines ordered by Notthingham.
Nacchio was convicted in 2007 on 19 counts of insider trading for illegally selling $52 million worth of stock six years earlier, after company insiders warned him that Qwest could not meet its financial targets.
His conviction was hailed as a major victory in the government's attempts to crack down on corporate titans who profited while their companies suffered serious financial setbacks. (Reporting by Gina Keating; Editing by Tim Dobbyn, Richard Chang, Gary Hill)
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