Displaying a noticeable degree of sincerity and clarity, Judge Nottingham spent an hour this morning going over sometimes very specific instructions to the jury before he released them for deliberations. Because these specific instructions related to particular evidence in the trial, it is worthwhile to review those instructions.
But first, the Judge allowed the following stipulation between the parties to redact the last sentence from Paragraph 4 of the Indictment before it is given to the jury. This sentence reads as follows:
“NACCHIO knew this policy, was repeatedly reminded of it and was advised that selling Qwest common stock while in possession of such information was a crime.”
While Judge Nottingham did not further elaborate on this stipulation, it is clear from his jury instructions why the parties stipulated on the removal of this sentence from the Indictment. First, Judge Nottingham later instructed the jury that one element of the crime of insider trading was that Nacchio “traded on the basis of material nonpublic information” and it was not enough that he traded while possessing material nonpublic information. Therefore, the last sentence of the indictment is not an accurate statement of the crime of insider trading. Moreover, later this morning, Judge Nottingham specifically instructed the jury that failure to adhere to a company policy is not evidence of insider trading. A violation of Qwest’s trading window policy is not evidence of the crime; it just goes to his state of mind for intent purposes.
The judge also ruled against the Defense’s request to redact the last column of the stock sales table starting on page 4 of the Indictment. This table lists the counts, dates of trade, number of shares, sales price per share, and finally the “Gross Sale Price.” The defense argued that the gross amounts of sales did not relate to the charge of insider trading and apparently, were concerned about the prejudicial effect of the large amounts involved. The judge refused to rule that this last column “Gross Sale Price” be redacted because it had already been offered in evidence and in his opinion “will help the jury in their deliberations.”
Finally, the court ordered the government to also redact the Forfeiture Allegation at the end of the Indictment before it is given to the jury.
Judge Nottingham next addressed the jury explaining that the instructions will not later be given to the jury in writing. He stated powerfully: “You are not concerned with what you think what the law should be--only on the law and evidence in the case. You are the sole and exclusive judge of the facts. Please perform this duty without bias, prejudice, or public opinion. Be impartial and reach a just verdict under the law. Perform this duty with complete fairness and impartiality.”
The following are the salient points of Nottingham’s instructions related to the evidence:
- Make a determination separately for each of the 42 counts. Determine whether Nacchio knowingly and willingly traded while possessing material nonpublic information and traded on the basis of this information. Give a separate verdict for each charge on the basis that the government proved each count beyond a reasonable doubt. You must acquit even if you believe he is guilty of some other crime not in the indictment.
- No inference of guilt should be made on the lack of witnesses or the fact that Nacchio did not testify. Nacchio has an absolute right not to testify. Don’t even discuss this fact in the deliberations.
- In contrast, if the government had a material witness that was available and the government did not have that witness testify, the jury can take that into account in weighing the government’s evidence. However, Yash Rana who has been mentioned numerous times in this proceeding should be considered “unavailable” to either party for purposes of this instruction. (It has been reported that Mr. Rana would plead the Fifth Amendment if called.)
- The court has ruled that Sally Anderson’s testimony was not admissible and will be stricken since the Nacchio email to her was before the relevant time.
- In judging the credibility of a witness, any inconsistent conduct or testimony before the trial can be considered to determine how much to believe the actual testimony at this trial. (This instruction might be applied by the jury when assessing Robin Szeliga’s testimony since Stern on closing played an audio clip of Szeliga testifying before Congress soon after Qwest’s implosion. Szeliga told Congress the economic downturn dramatically affected “making the numbers” in the second half of 2001 with no mention of the nonrecurring sales issue.)
- In judging the credibility of a witness, bias against the defendant can be considered. (This might be applied to Lee Wolf’s testimony since defense counsel wanted to show this bias. John Richilano’s first question for Mr. Wolf was “You just could not wait to testify against Joes Nacchio, could you?”)
- A witness given a grant of immunity by the government is a competent witness, but you should examine his or her testimony with caution and greater care to ensure it is not colored in a certain way. (This would apply to most of the officers and business unit heads at Qwest that testified).
- If a witness has plea bargained with the government for a lesser sentence, you should not infer that the defendant is guilty; you should also consider their testimony with caution and greater care. (This would apply specifically to Szeliga who plea bargained her insider trading prosecution).
The following are the salient points of Judge Nottingham’s description of the elements of the crime of insider trading. He stated that the jury must find beyond a reasonable doubt that the government has established each element of the crime of insider trading:
1. In connection with the sale and purchase of a Qwest security, the defendant employed a scheme, device, or artifice to defraud.
2. The defendant did this willfully and knowingly with the intent to defraud acting knowingly with the purpose for cheating and deceiving. The defendant acted voluntarily to disobey the law. He was conscious and aware of his action and did not act based upon mistake, ignorance, or carelessness. (In closing, Stern pounded on the point that Nacchio may have been mistaken, but “optimism is not a crime.”
3. The defendant was an “insider” of the corporation and traded on the basis of material nonpublic information.
4. The defendant was aware of the material information which is defined as a matter misstated or matter omitted reasonably expected to cause a reasonable person to act or not to act with respect to the security. Even forward looking statements can be material information. (This is especially relevant to the Nacchio support of the forward looking statements during the time of his trades.)
5. The material information is not public if the information is not effectively disseminated to the public such as filings of the SEC, press releases, or other sources.
6. The defendant sold on the basis of this nonpublic information. The government must prove that the person used the information to decide to trade—it need not be the sole reason, but a “significant factor” in making to decision to sell. (The defense asserted that Nacchio sold on the basis of many factors that were permissible.)
7. Good faith on the part of the defendant is a defense to insider trading. Good faith exists where the defendant acts under a belief honestly held even if such belief turns out to be wrong. This good faith exception does not apply if, at the same time, the defendant employs a scheme to defraud to take unfair advantage of another. The government has the burden of proof that the “good faith” defense does not apply. (In closing, Stricklin asserted that the backdating evidence vitiated the “good faith” defense.)
After excusing the jury to allow them to deliberate, Judge Nottingham told legal counsel that he will ask the jury to deliberate tomorrow as well before breaking for the weekend.