Nacchio Appeal: Jury Instructions Did Not Give Jury Proper Guidance Concerning Materiality of Omissions

This week many of our posts have focused on Mr. Nacchio’s opening appellate brief. Specifically, we have begun to flesh-out Mr. Nacchio’s arguments in his bid for either a new trial, or an overturning of his 19 insider trading convictions. The focus of this post is on Mr. Nacchio’s argument that the court erroneously instructed the jury on how to treat forward-looking statements. Moreover, the court rejected Mr. Nacchio’s proposed instructions that would have properly guided the jury as to the settled law concerning forward-looking statements. Therefore, the court abused its discretion and Mr. Nacchio should be granted a new trial. Brief of Appellant, United States v. Joseph P. Nacchio, at 31, NO. 07-1311 (10^th Cir. filed Oct.9, 2003).  The jury instruction in question was given as follows:

“Information may be material even if it relates not to past events but to forecasting and forward-looking statements so long as a reasonable investor would consider it important in deciding to act or not act with respect to the securities transaction at issue.” Id. at *32-33.

Mr. Nacchio objects to the use of this instruction because it allowed the government to prove the forward-looking information was “non-public” without having to show that it was required to be disclosed. Id. at *33.

The two instructions Mr. Nacchio offered were that of “reasonable basis” and “bespeaks caution.” Mr. Nacchio presents the argument that either of these two instructions would have properly instructed the jury on the treatment of forward looking statements. Mr. Nacchio defines forward-looking statements as being materially misleading if the statements were made without having a “reasonable basis” to do so; or if the investing public was not provided with adequate cautionary statements. Id. at *32.

At the very least, Mr. Nacchio argues that the court should not have rejected the government’s “materiality instruction” which included the “probability/magnitude” and the “total mix” standards. Mr. Nacchio asserts, the court’s failure to give any of these instructions requires a new trial. Id. at *33.

Mr. Nacchio asserts that the court wrongfully determined that the two instructions he offered were inappropriate for an insider trading case. *Id. Here, Mr. Nacchio disputes the claim stating that other courts have applied the reasonable basis “even in civil fraud cases involving projections” to counter the risk a jury will impose liability upon the defendant based on “20/20 hindsight.” Id. at *33. Similarly, Mr. Nacchio contends, the “bespeaks caution doctrine” has been considered a valid defense in securities fraud cases. Id. at *35. In total, Mr. Nacchio believes that the failure’s concerning jury instructions requires a new trial.

The primary materials for this case may be found on the DU Corporate Governance website.