The Defense Rests

The afternoon session resumed with re-direct of Professor Daniel Fischel.  Professor Fischel testified that he had worked in the past as an expert witness for both plaintiff and defense counsel and that he charged, as a matter of practice, the same rate to either party. Professor Fischel also testified that he had worked, back in 2001, with the Department of Justice in helping to devise valuation formulas to be used for compensating victims of the September 11th attacks. 

Professor Fischel also testified regarding Defense Exhibit A1981, which concerns the $28.50 strike price options granted to Mr. Nacchio during his tenure as CEO at Qwest.  Professor Fischel testified that if Mr. Nacchio had exercised those options and sold the shares as of August 13, 2000, Mr. Nacchio would have gained a net profit of approximately $55 million.  Professor Fischel also testified that a sale of the $28.50 strike price options on May 29, 2001 would have generated approximately $22 million net profit for Mr. Nacchio.

Defense counsel also asked Professor Fischel to comment on exhibits that indicated the pattern of Qwest's share price in 1999 and 2000 respectively. Professor Fischel testified that Qwest's share price climbed to the mid 30's in 1999 and that the share price rose into the 50's in 2000. Professor Fischel also testified that in studying Mr. Nacchio's trading activity, he had identified periods of inactivity evident in 1998, 1999 and throughout the first quarter of 2000. Professor Fischel also testified that the suspension of Mr. Nacchio's trading activity in May was based on a price based trading program (that trading would stop if the price fellow a specified price) instituted by Mr. Nacchio.

The prosecution was allowed to pursue a line of inquiry in which Professor Fischel was asked to testify about the trend for the price of Qwest's stock in 2001.  Professor Fischel testified that there was a persistent decline in the price of Qwest's stock for the later part of 2001. 

Judge Nottingham briefly excused the jury in order to make some legal rulings on Defense's motion to exclude testimony of Government's witness Prashant Khemka and Drake Johnstone and to allow Professor Fischel to testify as a rebuttal witness. Judge Nottingham denied the motions and stated that both witnesses gave testimony consistent with all pre-trial orders issued by the court (particularly that they were fact witnesses and not experts) and that to the extent the witnesses gave "opinion" testimony, it was mostly on cross examination by the defense. 

After the jury re-entered the court room, defense counsel played a portion of a Qwest analyst meeting where in Mr. Nacchio addressed questions.  Mr. Nacchio was observed stating that the options granted to him in 1997 would expire approximately 30 months from the date of the analyst meeting and that based on the "use 'em or lose 'em" nature of these options Mr. Nacchio would have to sell approximately 1 million per quarter in order to break even.  In the video Mr. Nacchio can also be seen telling analysts that he recommended to the board that it re-consider the plan for handling option grants so that Mr. Nacchio would not be "trapped into selling."  In the video, Mr. Nacchio categorized these options as having "...to exercise, can't lose them, must pay the taxes."  With that, the defense rested.

The prosecution called Richard Olson to the stand as their rebuttal witness. Mr. Olson testified that he was employed as a broker for Smith Barney (formerly Solomon Smith Barney) and that he had been Mr. Nacchio's broker for quite some time.  Mr. Olson also testified that he personally knew Mr. Nacchio and that he had acted as Mr. Nacchio's broker in 2000 and 2001.  Mr. Olson was asked to testify in regards a trade confirmation from January 2, 2001 that listed Mr. Olson as the financial consutant for the account of Joseph P. Nacchio in connection with a sale of 196,723 shares of Qwest stock at the price of $39.00 per share and a trade confirmation of a transaction in which Mr. Nacchio sold 160,000 Qwest shares on January 3, 2001.  

Mr. Olson also testified that he had no recollection as to any growth shares or any irrevocable instructions from Mr. Nacchio that pre-authorized Mr. Olson to sell shares.  Mr. Olson continued his testimony by discussing a sale of 100,000 Qwest shares made on November 3, 2000 at the price of almost $47.  Mr. Olson testified that in order to know to sell the 100,000 shares of Qwest stock he would have to receive instructions from Mr. Nacchio.  

On cross examination, Mr. Richilano had difficulty in getting Mr. Olson to recollect any of a series of meetings that Mr. Olson allegedly had with both the FBI and the prosecution. Mr. Olson also stated to Mr. Richilano that Mr. Olson could not re-collect any specific facts about interactions he had had with Mr. Yash Rana regarding trading activity on behalf of Mr. Nacchio. When asked if he had had any contact with defense counsel prior to testifying today, Mr. Olson stated that on advice from counsel for Citigroup, Mr. Olson and not met with any member of the defense counsel.

Judge Nottingham excused Mr. Olson from his subpoena and recessed court until tomorrow afternoon. After dismissing the jury for the day, Judge Nottingham informed both sides that arguments regarding the charges that will be submitted to the jury would be conducted tomorrow morning.