Court overturns Nacchio insider trading conviction

By Robert Boczkiewicz and Dan Whitcomb

DENVER/LOS ANGELES (Reuters) - A U.S. appeals court on Monday threw out the insider trading conviction of former Qwest Communications International Inc (Q.N: Quote, Profile, Research, Stock Buzz) Chief Executive Joseph Nacchio, ordering a new trial in front of a different judge.

The court criticized U.S. District Judge Edward Nottingham, who presided over Nacchio's trial, for barring testimony from an expert witness the defense considered key to its case.

Nacchio's conviction on 19 counts of insider trading had been hailed as a major victory in the government's attempt to crack down on Wall Street titans who profited as their companies self-destructed.

The 10th U.S. Circuit Court of Appeals in Denver voted 2-1 to overturn the conviction against Nacchio, who was found guilty by a federal court jury in April of 2007, and said the retrial should be in front of a different judge.

Nacchio was convicted on 19 of the 42 counts against him after prosecutors said he sold $101 million of Qwest shares on the warnings of company insiders that the phone carrier could not meet its financial targets.

Nottingham sentenced Nacchio to a six-year prison term, fined him $19 million and ordered him to forfeit $52 million. He has remained free on $2 million bail pending the appeal.

In reversing the guilty verdicts, 10th Circuit court said Nacchio's defense had relied heavily on the proposed testimony of Daniel Fischel, a finance and law professor who was prepared to present a study of Nacchio's trading patterns that showed they were inconsistent with insider trading.

The study also found that Qwest's share price was not significantly hurt when the information was made public.