Some Observations on Professor Fischel

We got to hear today from Daniel Fischel, the former dean at the University of Chicago Law School.

There has, over the last few days, been a battle over his testimony. On Thursday, Judge Nottingham ruled that he could not testify as an expert. The ruling came just as Fischel was about to testify and threw the Defense’s case into disarray. For the basis of the judge's decision, go here.  The transcript is at the DU Corporate Governance web site (dated April 5). 

Over the weekend, the Defense filed motions to allow Fischel to testify as an expert to rebut testimony given by two analysts called by the government. The pleadings are at the DU Corporate Governance web site.  On Monday morning, Judge Nottingham indicated that he had read the various pleadings (most of which was filed on Sunday and are posted on the DU Corporate Governance web site) and, while the matter required further study, did not think that the analysts had given opinion testimony that allowed for rebuttal. 

After these discussions, Fischel finally took the stand Monday morning to testify as a summary expert, introducing information about Joe Nacchio’s trading history but still unable to give any expert opinions. We learned that he apparently spends most of his time at Lexicon, although he acknowledged continuing relationships at Northwestern and the University of Chicago. We learned that he bills $1000 an hour and that Lexecon gets most of its business from the Department of Justice.

Mostly the testimony showed that, based upon comparisons with past trading activity, the level of activity in the first two quarters of 2001 (the period of alleged insider trading) was not unusual and in some cases lower than prior quarters. Thus, for example, when Nacchio sold 22.8% of vested in the money options in the second quarter of 2001, he had sold more than 34% in the second quarter of 1999. The data excluded the sale of 350,000 or so shares received in connection with compensation for the growth shares (something Fischel repeatedly characterized as something that would be misleading to include) and, although purporting to show the percentage of options exercised through December 31, 2001, did not take into account that more than 2 million of the unexercised options were apparently out of the money.

At the end of the testimony, outside of the presence of the jury, Judge Nottingham confirmed what had been suspected earlier.  There was no basis for rebuttal testimony from Fischel.  With that, he was excused.