Guest Commentary, John M. Holcomb, Professor, DU Daniels School of Business

Onlookers expecting high drama and persuasive closing remarks from defense counsel Herbert Stern might have been disappointed Tuesday afternoon. Stern continued a pattern of making disorganized and halting arguments, and if he created or reinforced any reasonable doubt in the minds of the jury, he did so by obfuscating rather than clarifying the issues. By 5:00 p.m. and after an hour of rambling closing arguments, he virtually requested the recess until the next day that Judge Nottingham announced. This had been a bad day for the defense, and it was time for Stern to regroup for another day.

The prosecution team made a wise choice in leading off with Ms. Conry, given the lack of a female litigator on the defense team. She attempted to simplify the case for the jury by carefully connecting the dots between Nacchio’s knowledge of problems besetting Qwest, a rosy picture he was painting for analysts and investors on future growth prospects, and the timing of his insider selling. His backdating of a major sell order spoke loudly of his intent to avoid prosecution and of his knowledge of his own wrongdoing, according to Ms. Conry. She wove together the key elements of an insider trading case by saying Nacchio had to tell in order to sell.

Stern repeated earlier testimony and argument that Nacchio had to sell in order to avoid losing his options, which he allegedly much preferred not to sell after exercising his options. However, Stern failed to directly address the prosecution’s time line and narrow window of massive selling by Nacchio. Stern’s disorganization, the frequent delays between his statements, and his wandering from one easel to another and occasional fumbling with visual aids might have caused him to lose the jury. Much of the time, he had his back to the jury while working with his visual aids. By contrast, Ms.Conry seemed to move much more easily from one clear computerized demonstration or audio excerpt to another, while maintaining direct eye contact with the jury. Her arguments also flowed logically in an organized fashion and seemed to maintain the attention of the jury.

On both style and substance, the prosecution team was a clear winner of this vital round of closing arguments. Even though this insider trading case is not as complicated as a case on accounting violations might have been, it is still not a simple case. A lot of testimony has to be tied together and explained to the jury in closing arguments, making them extremely important in a case like this. To find the simplicity beyond complexity was the challenge for each side, and Ms. Conry and her colleagues rose to the challenge. Mr. Stern did not.

While Mr. Stern has posed alternative explanations for Nacchio’s stock sales, he has not yet successfully grappled with the compelling evidence of backdating and what occurred during narrow trading windows. There are also contradictions underlying some of Nacchio’s motivations which Mr. Stricklin might examine in his own closing. Mr. Stern may yet make use of Professor Fischel’s interesting quantitative analysis of Nacchio’s trading patterns, but there are also the seeds of a response to that analysis in Ms. Conry’s explanation of Nacchio’s windows of trading. We might look for Mr. Stricklin to emphasize those windows of trading and directly address the irrelevance of some of Fischel’s quantitative analysis in his own closing arguments. Ms. Conry also skillfully incorporated excerpts from the Qwest code of ethics in her closing argument, and that too bears more emphasis

The government gained some headway in this case in its own closing arguments. If it winds up prevailing in the jury’s mind, at least on most of the counts against Nacchio, he may have to find appellate counsel who can find and frame more compelling arguments. Then again, with Judge Nottingham’s careful decisions on motions in this case, and with equally careful instructions to the jury, there may be little to appeal if the verdict goes against Nacchio.

It has been said and written that the defense team failed to call Nacchio to testify due to its own high level of confidence in the outcome. An alternative explanation is that the defense feared what might emerge through cross-examination of Nacchio and his demeanor on the stand. It may also reflect their own belief that Nacchio’s supposed access to classified information revealing great upsides for Qwest in the future was a defense that contained a lot of holes. As a potential defense that has not really been used, it has surely consumed a lot of time and expense for each side to explore.

Comments

[Dylon]

Thank you for the great review.