Jury Instructions and Stern's Closing

Stern started off by pointing out that Conry for the prosecution misstated yesterday the law of insider trading with her statement: “If you don’t tell, you can’t sell.” Stern said illegal insider trading law also required a showing that Joe Nacchio actually used any material nonpublic information as a basis for his trades. While there is some controversy on this Stern’s point, the actual jury instructions (Court Instruction No. 16) states:

“It is not sufficient for the an [sic] insider to have merely possessed material, nonpublic information when he traded. The inside information need not have been the sole cause of the trade. It is sufficient that the inside information was a significant factor in an insider’s decision to sell stock.”

Consequently, Stern will hope his closing arguments this morning illustrates to the jury the evidence that the material nonpublic information, if it did exist, was not a significant factor in making the trades and thus cannot be found guilty of insider trading. Moreover, Stern raised the “good faith” aspects of Nacchio’s conduct in supporting the projected street numbers during the relevant time of the trades. Stern is trying to use this “good faith” defense to come within the jury instructions. Court Instruction No. 17 states:

“A person who acts on a belief or an opinion honestly held is not punishable under this statute merely because the belief or opinion turns out to be inaccurate, incorrect, or wrong. An honest mistake in judgment does not rise to the level of criminal conduct.

However, this instruction also states that if the defendant knowingly makes false representations, the good faith defense is not allowed. Moreover, the government can rely on Court Instruction No. 13 to show that forecasts such as the “street numbers” promised by Nacchio for Qwest could be considered material “so long as a reasonable investor would consider it important in deciding to act or not to act with respect to the securities transaction at issue.”