Nacchio lawyer: Conviction of former Qwest CEO was flawed

Maureen Mahoney also told the 10th U.S. Circuit Court of Appeals that the trial judge wrongly prevented a defense witness from testifying and that the judge's instructions to the jury were inadequate.

Nacchio was convicted in April on 19 counts of insider trading relating to $52 million worth of stock sales in 2001. He was sentenced in July to six years in prison.

The appeals court did not indicate when it would rule.

Nacchio, who is free pending the appeal, did not attend the hearing, which was held in an overflowing courtroom.

Prosecutors have argued Nacchio was warned that certain non-recurring revenue was drying up in 2001 but stuck to public projections that other executives feared the company could not reach.

Mahoney said former Chief Financial Officer Robin Szeliga had told Nacchio roughly $1 billion of revenue in Qwest's internal budget of roughly $22 billion was at risk, an amount Mahoney argued was not material.

Mahoney said court precedents found that for interim company results to be material, they must suggest an "extreme departure" from how the public expects a company to perform. She argued Qwest's situation didn't meet that requirement.

Government attorney Stephan Oestreicher Jr. told judges the case wasn't strictly about numbers but the fact that unknown to the public at time, Qwest's business plan was failing. He also argued that Nacchio had told his employees that missing public financial targets by just $50 million was huge because Qwest's stock would get "whacked."

The judges gave no indication of how they might rule, but during the hearing, they repeatedly asked Oestreicher why the trial judge denied Daniel Fischel from testifying in Nacchio's defense. Prosecutors say the government had said the defense didn't establish the reliability of Fischel's opinions or disclose how he arrived at them.

Nacchio's attorneys say Fischel, an expert on corporate law and markets, was a core part of his defense and could have explained to jurors what must be publicly disclosed and that Nacchio's stock sales were to diversify his portfolio. Mahoney said a reasonable jury hearing testimony from Fischel would have acquitted Nacchio.

During his trial, prosecutors said Nacchio knew his company was at financial risk at the time he was selling shares but didn't tell investors. His sales came before Qwest shares plummeted.

Mahoney argued in court briefs that Nacchio's stock sales were not based on nonpublic information and that he had announced his decision to sell shares well in advance.

She also said Nacchio's sentence was calculated incorrectly.

Nacchio still faces a civil fraud lawsuit filed by the Securities and Exchange Commission against him and four other former Qwest employees. The SEC alleges they coordinated a financial fraud that allowed Qwest to improperly report approximately $3 billion in revenue. Qwest later restated its revenue to erase $2.2 billion.