Cliff Stricklin and Having "Skin in the Game"

We are again fortunate to have a number of posts coming up today, both from the University of Denver Sturm College of law and the University of Denver Daniels School of Business. This post will mostly relate to a discussion of a portion of the government's rebuttal closing given by Cliff Stricklin.

First, just an observation on style. Stricklin did not stay behind the podium but often walked up to the jury box, engaging the jurors directly. His words sometimes contained the slightest trace of a southern accent, remnants of his Texas roots, and he often spoke without references to notes. He also used folksy expressions, telling the jury that not selling shares meant having some “skin in the game.”  Mostly, though it was a well honed presentation, with no long stretches that lost the attention of the jury. The jury was riveted.

This Blog author has been following the backdating allegation, in particular. Stricklin devoted considerable time to the subject. He opened the topic by observing that sometimes “words are not the best way” to determine what’s going on in someone’s mind. Instead, it’s actions. With that, he turned to the document signed by Joe Nacchio and dated November 3. He pointed out that “the defense’s story” on the document only came out “a few minutes ago”, a pointed reference to the statements by Herbert Stern earlier in the day where he more or less admitted that the document had been written and signed in December.

Stricklin didn’t just repeat facts, but created images. He invited the jurors to the 52^nd floor, the executive suite in the Qwest building, at 1801 California Street, to Nacchio’s office, telling them to imagine Nacchio with a pen in hand and the irrevocable instructions in front of him on the desk. With the document dated November 3, Nacchio, with pen in hand, “at that very moment” had a choice. He could scratch out that date and put in the “true date” or could choose “to make an intentional deception” and sign it with a Nov. 3 date still there. “In this case,” Striklin told the jury, ”Mr. Nacchio put his signature on this document” because he knew what other investors didn’t.

He then walked through the evidence, the two David Weinstein memoranda, one in November memorializing a conversation with Nacchio about the growth shares where the topic of instructions never came up, and another in early December memorializing a conversation with Qwest attorney Yash Rana, where Weinstein learned that Nacchio had “previously made” the irrevocable election. This latter memorandum was the controversial document that only came in yesterday when Weinstein testified (for the second time) over the objections of the defense and as the last witness in the case. As to the representations that Nacchio had already executed the instructions.  “You now know that’s not true,” Stricklin told the jury.

Powerfully, he then took up the defense claim that the document merely memorialized oral instructions given on November 3 ("backup" as Stern described earlier today).  Was there “any evidence” that Nacchio had given oral irrevocable instructions on November 3, Stricklin asked, to which he answered: “There is none.” He pointed out that Nacchio spoke with two people on November 3 (Weinstein and his broker, Rick Olson) without ever mentioning the instructions and that witnesses from the the broker that executed the trade knew nothing about the the instructions. Instead, Stricklin emphasized, it was written in December as a “way to cover his  [Nacchio's] tracks”

And, Stricklin asked, “how do you give an oral irrevocable instruction” anyway? It “doesn’t make sense.” He pointed out that to draft a proper set of written instructions it took input from three lawyers, two of them from a national law firm. Nacchio didn’t even have this language on November 3. “If there was one shred of evidence of any kind you would have heard it.”

He then brought out the Form 144 signed by Yash Rana with respect to the shares sold on January 2, 2001. There was language on the front of the form crossed out.  The crossed out language apparently disclaimed knowledge of inside information at the time of the sale.  It was replaced with an addendum. The addendum indicated that there was no inside information as of November 3.  If Nacchio had no inside information on Jan. 2, when the sales occurred, Strickin asked, why didn’t he just go ahead and sign the document?  By only referencing November 3, “he was admitting” that on this day “he was in possession of material nonpublic information.” These documents, Stricklen averred, allow you to “step inside Joe Nacchio’s mind”

Later Striklin would come back to the backdating. He did so in the context of the good faith defense.  The backdating, he intoned, “drives a stake through the heart of the good faith defense.” You “cannot cannot be dishonest and have good faith at the same time.”

The jury has mostly heard about the backdating in bits and pieces.  Stricklin brought all of the evidence on the backdating together, weaving it into a compelling story.  It's still the case that Stern made good points asserting that Nacchio didn't have inside information in December and, as a result, had no reason to backdate.  But the presentation was powerful and to the extent the jurors decide that Nacchio was deceptive about the backdating, they will be more likely to believe that he traded on the basis of material nonpublic information.