The 10th Circuit said in its key determinations (citations omitted):
After a sixteen-day jury trial, the jury deliberated for six days and convicted Mr. Nacchio on the nineteen counts of insider trading covering his trades in April and May 2001. It acquitted him of the counts covering the trades from January to March. The district court then sentenced Mr. Nacchio to six years’ imprisonment on each count, to run concurrently, two years’ supervised release on each count, to run concurrently, fined him $19 million, and ordered him to forfeit over $52 million more. Challenging his conviction, his sentence, and the forfeiture, Mr. Nacchio appeals to this Court. We reverse his conviction and remand the case for a new trial. In Section II, we discuss the evidence that Mr. Nacchio was prevented from using at trial, and explain why the district court’s error entitles him to a new trial. We cannot stop there, however, because the government is entitled to try the defendant a second time only if its evidence at the first trial was legally sufficient. In Section III, therefore, we explain the government’s theory of the case and discuss the sufficiency of the evidence in light of the jury instructions, concluding that a properly-instructed jury could have found the Defendant guilty of insider trading. Finally, in Section IV we discuss the nature of the remand.
II. EVIDENTIARY ISSUES
The defense strategy relied heavily on the proposed testimony of an expert witness, Professor Daniel Fischel, and classified information relevant to Qwest’s business prospects and the defendant’s state of mind. The district court excluded both, and on appeal the defendant asserts that these decisions are reversible error. We agree that the district court’s exclusion of Professor Fischel’s testimony was an error that requires a new trial. There was no error in excluding the classified information. . . .
IV. RETRIAL . . .
Because he will have to be sentenced anew if he is convicted again, we do not need to reach the challenges Mr. Nacchio raises to the forfeiture of his assets or his sentencing enhancement.
Finally, the defendant asks us to assign any new trial to a new district judge. In this Circuit, we exercise our power to do so only where we find either that the judge harbored “personal bias” or on the basis of circumstances laid out in a three-part test: (1) whether the original judge would reasonably be expected upon remand to have substantial difficulty in putting out of his or her mind previously-expressed views or findings determined to be erroneous or based on evidence that must be rejected, (2) whether reassignment is advisable to preserve the appearance of justice, and (3) whether reassignment would entail waste and duplication out of proportion to any gain in preserving the appearance of fairness. We do not suggest that the assigned district judge harbored personal bias against Mr. Nacchio, but we do conclude that the factors outlined in Mitchell militate in favor of retrial before a different judge. After reading the trial transcript, we have concluded that it would be unreasonably difficult to expect this judge to retry the case with a fresh mind. Because the government will have to retry the case from scratch either way, there is no unnecessary “waste [or] duplication” in reassigning it.
With regard to the classified information defense raised by Nacchio, the unanimous 10th Circuit panel rules that:
Mr. Nacchio argues that undisclosed positive information can be used as a defense to a charge of trading on undisclosed negative information. We disagree. If an insider has material information that he cannot disclose because it is confidential or proprietary, then he must abstain from trading.
The expert testimony was excluded at trial because there was inadequate advanced disclosure of its nature and contents. The majority disagreed stating (citations omitted):
The district court’s belief that Rule 16 also requires extensive discussion of a witness’s methodology was incorrect, and its exclusion of the evidence an abuse of discretion.4 . . . In a criminal trial the proponent of expert testimony is not under any obligation to provide a “a complete statement” of the reasons for the expert’s opinion, compare Fed. R. Civ. P. 26(a)(2)(B)(i), or an explanation of the expert’s methodology.
FN 4: At oral argument, the defendant appeared to argue that the Rule 16 disclosure did substantially discuss Professor Fischel’s methodology. We agree with the district court’s conclusion that it did not. . . .
Professor Fischel’s testimony was to include a discussion of the economic incentives that inside information would have given Mr. Nacchio, the statistical significance of the differences in his trading patterns, and the likelihood that economic diversification better explained the challenged sales than inside information. The judge concluded that all of these things were “within the common knowledge of the jury” and that “[t]he jury simply d[id]n’t need this so called expert witness to testify that diversification is an issue in this case.” This misunderstands the nature of economic expertise. An economic expert is permitted not only to tell the jury that an economic concept “is an issue” but to analyze the concept and offer informed opinions. In other words, expert testimony may “assist the trier of fact to understand the facts already in the record, even if all it does is put those facts in context.” That is why expert economic testimony is routine when a materiality determination requires the jury to decide the effect of information on the market. While economic analysis sometimes asks jurors to “abandon their own common sense,” that is not a reason to deem expert testimony inadmissible. Armchair economics is not the way to decide complex securities cases. . . .
The theory of Mr. Nacchio’s defense was that the stock price was not affected by his disclosures, that his conduct had an innocent explanation, and that a reasonable investor would not have found his inside information very important. Professor Fischel’s testimony, as described in the disclosure, could have addressed each of these issues, and if credited by the jury, might have changed the jury’s mind. The record does not otherwise contain “overwhelming evidence of guilt,” and so we cannot say the exclusion was harmless.
The dissenting opinion argued that Nacchio had failed to introduce sufficient evidence to establish that this expert was qualified to testify as an expert based upon a valid and reliable methodology, that he was on notice that he needed to do so, and that as a result, the evidence was rightly excluded whether or not the methodology and expertise would have been sufficient if the proper foundation had been offered for that testimony.
On retrial the trial will likely be shorter, because there will be fewer charges relating to fewer trades. There will also be less room for legal wrangling by the defense, because all important issues other than those related to sentencing have been resolved with this appellate decision. The Justice Department is unlikely to let this one go, although a post-appeal plea bargain is an outside possibility.
The decision is unsurprising based upon a pre-ruling motion ruling that made clear that the appellate panel thought that there was merit in the appeal.
Either party could appeal the ruling in an en banc decision, or to the U.S. Supreme Court. But, I doubt that either side will see success if they make the attempt. The issue upon which Nacchio won his appeal is pedestrian and is a mixed question of fact and law making it a poor vehicle for establishing broader legal principles. The U.S. Supreme Court is likely to reserve any opinion on the secret evidence issue until after the retrial is over. And, a new judge could issue a very different sentence upon a retrial, which will be subject to more lenient review under recent U.S. Supreme Court sentencing decisions.