The Jury Has Ruled

Sometime around 4:30, the parties were made aware that the jury had reached a verdict.  According to one report, when the counts were read, one by one, the words "not guilty" echoed throughout the courtroom, the defense looking optimistic.  Then they changed, with the jury convicting on the counts involving the trades in April and May.  As one local newspaper noted, the "verdicts cover sales of 1.33 million shares in April and May 2001 with gross proceeds of $52 million." 

It is clear from the verdict, as we have noted in prior commentary, that the government did not succeed in proving that Nacchio had material inside information when he traded in January 2001.  This was the part of the trial where the defense was particularly strong, showing that the internal concerns at Qwest were about the internal budgets rather than the external guidance.  The verdict also indicates that the jury did not buy the government's argument that Nacchio had backdated the instructions to sell the growth shares (there was a dispute as to whether Nacchio had ordered the trades in early November or mid-December). 

On the other hand, the government did a convincing job with the jury showing that Nacchio had inside information in the period after the first quarter of 2001.  The government presented evidence showing that Qwest was not "taking off" with respect to its recurring revenue and presented two analysts who indicated that they viewed the amount of revenue from the first quarter coming from non-recurring sources (the so called one-timers) as very important.  With the defense putting only three witnesses, the testimony of these two analysts (who testified toward the very end of the government's case) likely had a disproportionate impact on the jury.  

We will have more thoughts on this later.