An Old Qwest … And A New Enron?
On a day that presaged future lawsuits against big corporations, the story of a past meltdown was back in the news. Citing a prejudicial ruling by a controversial trial judge, the 10th U.S. Circuit of Appeals Monday threw out all 19 insider-trading convictions against Joe Nacchio, the former head of Qwest Communications.
The federal appeals court panel also is going to allow prosecutors to re-try Nacchio if it so chooses, but there is no guarantee that is going to happen, much less happen anytime soon. The Justice Department immediately declared that the ruling was a "setback, not a defeat" but where I come from when you get "set back" to nearly zero after years and years of litigation you call that good old-fashioned butt-whupin'.
It's always a surprise when an appeals court throws out a jury verdict, but the 10th Circuit ruling was even more surprising for its pronouncement that the trial judge in the Nacchio case, Colorado's Chief U.S. District Court judge Edward Nottingham, could not fairly sit in judgment on any second Nacchio trial. It is an extraordinary thing for an appeals court to essentially kick the trial court judge off the job like that.
There may be perfectly legitimate legal reasons within established precedent for this. But it also may be true that Judge Nottingham was politely uninvited to the next Nacchio party because he, the judge, is embroiled in his own scandal and that the 10th U.S. Circuit Court of Appeals has been asked to determine whether the judge's out of court behavior violates his duties as a life-tenured jurist. His name and phone number, allegedly, were recently found in the books of a Denver prostitution business that is being investigated by the IRS.
Last year, meanwhile, testifying at his own divorce trial, Nottingham, feared and revered in Colorado as one of the meanest judges on the bench, declared that he was too drunk to remember how he had spent approximately $3,000 over two days at a local strip club. The 10th Circuit reportedly investigated that as well. So when the opportunity arose, in the Nacchio case, to get rid of Judge Nottingham sooner rather than later his fellow judges acted. It is even possible, of course, that the judge ultimately may be a party before the 10th Circuit depending upon how things play out.
Which naturally brings us back … to future litigation. J.P. Morgan reportedly paid just $236 million for the hapless Bear Stearns but had to commit approximately $6 billion to the deal to cover the anticipated legal (and severance) costs of presiding over the corpse of its formal rival. Already, Bear Stearns shareholders were said to be contacting their class-action-minded attorneys. There will be civil lawsuits, I reckon, within the month if not the week. Is Bear Stearns the New Enron? The New Qwest? Ask Nacchio. He'll be happy to talk with you about it now in his spare time.