[JURIST] The US Court of Appeals for the Tenth Circuit [official website] ruled [opinion, PDF] Friday that former Qwest Communications [corporate website] CEO Joseph Nacchio [JURIST news archive] was incorrectly sentenced to six years in prison due to flawed methodology. In sentencing Nacchio, who was convicted of insider trading [JURIST report], the trial court ruled that Nacchio had made approximately $28 million in net profits by selling stock based on information not available to the public. The district court imposed the six-year sentence based on federal sentencing guidelines [USSG § 2F1.1]. The appellate court found, however, that by ignoring the normal appreciation in the value of the stocks, Nacchio's illegal gains were overstated. The court held that "[b]ecause mere trading does not constitute criminal insider trading, it logically follows that any gain made from lawful trading should not be considered as gain used to increase a prison sentence." The appellate court did not specify how to calculate the illegal gain, only ruling that on remand, "the district court should focus on arriving at a figure that more closely approximates Mr. Nacchio's gain resulting from the offense of insider trading." (emphasis in original.) The appellate court also found that the district court incorrectly determined the amount of money Nacchio should forfeit and remanded that issue as well.
In April, Nacchio reported to the minimum security prison camp [JURIST report] at FCI Schuylkill [official website], marking an end to nearly two years of appellate proceedings following his April 2007 conviction for illegally selling $52 million of Qwest stock in 2001. Nacchio's conviction was overturned [JURIST report] by a Tenth Circuit panel in March 2008 due to improperly excluded expert testimony, but was reinstated [opinion, PDF] in a February 2009 en banc rehearing requested [JURIST report] by the prosecution. Federal prosecutors indicted Nacchio in December 2005 on 42 counts of insider trading [JURIST report]. He and other former Qwest executives still face civil fraud charges [JURIST report] brought by the US Securities and Exchange Commission [official website] on allegations that Qwest improperly reported approximately $3 billion in revenue that eased its 2000 merger with US West.