The afternoon session saw the conclusion of Stern’s marathon closing argument. The tone was different for the last part of his argument, becoming more emotional in nature, with an underlying plea to the jury’s common sense. He engaged the jury more directly, making statements like, “What matters in this room is what is in your heart, in your mind, and in your character,” and, “is there a doubt in your mind that that man believed in his company?”
Stern also addressed the looming IRU issue. He conceded that the company derived a substantial amount of its revenues early in its life from the transactions, noting that this was something that was well known. He also emphasized the importance of reaching earning targets, regardless of the revenue mix, saying, “if you do, no one throws stones at you.”
One of the major themes that Stern carried over into the afternoon is the idea that Nacchio was repeatedly told by his investment advisors that if he didn’t exercise his options and sell, he was going to lose a lot of money. Yet, according to Stern, Nacchio refrained from selling most of his shares; as evidenced by the fact that the Nacchio family held more shares at the end of 2001 than at the beginning.
The last portion of Stern’s closing addressed the issues the Nacchio family faced while he was negotiating a new employment contract with the Qwest board in early 2001. Stern argued that Nacchio wasn’t holding out on the board’s offer of 5m stock options at a strike price of $38.50 because he thought the company was in trouble, but because of the trials his family was enduring; and that to assert otherwise was an “affront” towards Nacchio. He ended his lengthy closing by pointing out to the jury that if Nacchio had really wanted to take advantage of any insider information he may have had, he could have resigned in early 2001, at the time of his son’s attempted suicide, and then cashed out without worrying about trading windows.
Making rebuttal arguments for the prosecution was Cliff Stricklin. He opened by describing Nacchio’s actions as taking “his chips off the table while risk abounded.” Stricklin moved around quite a bit, engaging the jury directly, and hardly ever reading from transcripts or documents.
The first half of his rebuttal had three themes; expiration, diversification, and taxation. Stricklin pointed out that Nacchio had until June of 2003 to exercise his options, and that once they were exercised, there was no expiration concern. Stricklin addressed the defense’s claim that Nacchio had a problem with trying to get rid of the vested options, joking, “I’ve got problems; stock options isn’t a problem, it’s a privilege.” He also argued that Nacchio was well aware of the concept of diversification before January 2001 and attempted to refute that taxation was a real concern. In the course of making these points, he noted that as of February 2001, Nacchio held over $70m in cash. Yet, he told the jury, “I don’t want you to convict Joe Nacchio because he’s a rich man.”
Stricklin then moved to Nacchio’s intent. He spent a great deal of time discussing the purported irrevocable sell order for January 2, 2001 that led to the first two counts of the indictment. Previously, the defense had admitted this document was backdated, giving Stricklin all the ammunition he needed to represent it as a smoking gun. He argued, “This document was a way of covering his tracks.” And he stated to the jury, “It also drives a stake through the heart of the good faith defense,” as well as, “You cannot be dishonest and have good faith at the same time. It’s like oil and water; it doesn’t mix.”
Stricklin later launched a direct assault on the emotional appeals Stern made during his closing. First asserting, “To listen to the defense’s case is to elevate Joe Nacchio to the level of victim… When you have a net worth of half a billion, how much of a victim can you be?” He created the theme that Nacchio was attempting to blame the whole ordeal on everyone else; DLJ, his top executives, his financial advisors, and so on. Stricklin closed the argument by charging the jury, “you have the power to set the standards of justice in this community.”
After Stricklin rested at 4:25, Judge Nottingham decided to wait until tomorrow to instruct the jury, telling them, “rather than make you listen to one more lawyer today, one in a robe, I’m going to send you home.”
Jury instructions will take place at 8:45 tomorrow morning.