Conviction of Qwest's former CEO Nacchio overturned

— -- A U.S. appeals court on Monday overturned the inside-trading case of former Qwest CEO Joe Nacchio, ordering a new trial in front of a new judge.

The court's decision is a major victory for Nacchio, who in April was convicted on 19 of 42 counts of inside trading involving $52 million in Qwest qstock. He was sentenced to six years in prison, but remained free on bail pending the outcome of his appeal.

Reached moments after the decision was released Monday, Herb Stern, Nacchio's lead lawyer, said he was "delighted" by the turn in the case. "It seems clear that we will have the opportunity to clear Mr. Nacchio's" name and reputation, Stern told USA TODAY.

Prosecutors spent years piecing together their case against Nacchio, ultimately accusing him of dumping millions of dollars' worth of Qwest shares because he believed the company was faltering, even as he continued to talk bullishly about its financial prospects.

Nacchio, Qwest's CEO from 1997 to 2002, has maintained his innocence. After he left, Qwest went into a financial free fall and had to restate $2.2 billion of revenue.

In overturning the case, the appeals court sharply criticized U.S. District Judge Edward Nottingham, who oversaw Nacchio's trial, for not permitting the introduction of expert testimony that his lawyers considered crucial.

Making matters worse for the prosecution, perhaps, the appeals court said Nottingham dealt with this issue in an abrupt, off-the-cuff manner. Such requests are supposed to be handled by the bench in a thoughtful, balanced way.

"The appeals court has concluded that the judge did not give this defendant a fair shake," said Steve Peikin, a partner in Sullivan & Cromwell and a former assistant U.S. attorney for the Southern District of New York.

To avoid this very outcome, Peikin said, savvy prosecutors often allow — rather than try to block — expert testimony. "Let it in and ridicule it," he says, referring to a popular tactic among prosecutors.

On a positive note for the prosecution, the appeals court concluded that there was sufficient evidence to convict Nacchio.

That's probably why the case was overturned, and not dismissed outright, Peikin says.

U.S. Attorney Troy Eid tried to put a good spin on the court's ruling. "This is a setback, not a defeat," he said in a prepared statement. Eid noted that the appeals court found "sufficient evidence to convict Mr. Nacchio of insider-trading," adding, "We're considering all our legal options."

Prosecutors have the option of asking for a hearing before the full Court of Appeals — not just the three judges who heard the case this go-round. If the full court still thinks a new case is warranted, prosecutors, at that point, would have to decide if they want to retry the case.