there is sufficient evidence to warrant a new trial and that Nottingham's decisions in regard to admissibility of classified information and jury instructions were correct.

Another trial probably wouldn't start until next year, at the earliest.

Nacchio, 58, has remained free on $2 million bond during the appeal.

The majority decision — by Judges Michael McConnell and Paul Kelly — said Nottingham erred in not allowing expert testimony from Northwestern law professor and private consultant Daniel Fischel.

"We conclude that on the record before him the district judge was wrong to prevent Professor Fischel from providing expert analysis, and that this error was not harmless," the ruling states.

In an extremely unusual move, the panel ordered the new trial be heard by a different district 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," Kelly and McConnell's opinion states.

They said that they weren't suggesting Nottingham "harbored personal bias" against Nacchio. During the trial, Nottingham often lashed out at attorneys for both sides, though more frequently at Nacchio's lead attorney,

Joe Nacchio was looking at a prison term and a multimillion-dollar fine when this photo was taken after his conviction last spring. Monday's decision to overturn the verdict and give him a new trial most likely yielded a happier expression. (Andy Cross, file photo )

Herb Stern. He gave Nacchio a lecture on morality during

"We are, of course, delighted and look forward to Joe Nacchio's ultimate and total vindication," Stern said.

Maureen Mahoney, Nacchio's appellate attorney, said she was "grateful for this important victory."

"If the government decides to retry the case, we expect him to be acquitted," Mahoney said. "The additional evidence will establish beyond any doubt that Mr. Nacchio did not commit a crime."

Troy Eid, U.S. attorney for Colorado, said in a statement, that the ruling was a "setback, not a defeat."

"The good news is the circuit court said our trial team presented sufficient evidence to convict Mr. Nacchio of insider trading," he said.

Clash over procedure

After a month-long trial in Denver federal court, Nacchio was convicted last April on 19 counts of illegal insider trading connected to his sale of $52 million in Qwest stock in early 2001. He was acquitted on 23 other charges.

He was sentenced to six years in prison and ordered to pay $71 million in fines and forfeitures.

Illegal insider trading is selling or buying securities on the basis of material, nonpublic information.

Among other things, Fischel would have testified that the inside information Nacchio held was not material or significant enough to legally require him to publicly disclose it.

That information included warnings Nacchio received from his top executives that the company would struggle to hit financial targets in late 2000 and 2001, but did not disclose to shareholders.

Nottingham allowed Fischel to testify only in summation about the facts surrounding Nacchio's stock sales, such as whether he accelerated the sales or not, ruling that the defense didn't properly provide an expert report in advance of the testimony.

Kelly and McConnell said the defense is not required to file such a report, only a "written summary of any testimony," which it provided. The judges also said Nottingham didn't hold a separate hearing or solicit court filings on the matter, which is required under federal law.

Appellate Judge Jerome Holmes wrote in the dissenting opinion that "the district court was well within its discretion in excluding professor Fischel's expert testimony."

"Mr. Nacchio failed to satisfy the district court that professor Fischel's testimony would be either reliable or relevant," Holmes wrote in the dissenting opinion.

Fischel declined to comment Monday. He was one of only three witnesses the defense called. Mahoney said during oral argument in December that Fischel's testimony was central to Nacchio's defense.

Plea deal unlikely

Denver-based Qwest footed Nacchio's legal tab during trial and some of his costs during the appeal. Qwest's corporate bylaws require it to advance legal fees to current and former officers who may be involved in any legal proceeding because of their work with the company. As such, it likely will be required to pay for Nacchio's legal fees during the new trial.

Qwest spokesman Bob Toevs said the Denver-based company respected the court's decision but declined to comment further.

The government has 14 days to petition for a review by the 12 active appellate judges in the 10th Circuit. The government needs seven votes in favor to secure such a review, said appellate attorney Blain Myhre.

University of Richmond law professor Carl Tobias said he expects the government to retry Nacchio. "They committed a lot to this, and I think they want to see it through," he said.

Nacchio was indicted in December 2005 after a years-long investigation.

White-collar crime expert Peter Henning said: "Essentially, this was just a whiff by Judge Nottingham."

A new trial will feature a new lead attorney for the government because lead prosecutor Cliff Stricklin has said he is going into private practice. The other four prosecutors on the case are still with the government.

Experts said a plea deal is unlikely.

"I would not expect Mr. Nacchio to be very interested in cutting a deal," said former federal prosecutor Rick Kornfeld. "I would think that he would feel somewhat emboldened by this decision."

Lynn Turner, a former chief accountant for the Securities and Exchange Commission, said a new trial could allow the government to present evidence it wasn't allowed to previously, such as Qwest's $2.5 billion restatement of revenue booked under Nacchio's watch.

Nacchio served as Qwest's CEO from 1997 to June 2002.

Though rare, other white-collar fraud convictions have also been overturned. Former Credit Suisse First Boston star investment banker Frank Quattrone had his obstruction of justice conviction reversed because of flawed jury instructions.

What's next

The government has the option to petition for the entire 10th U.S. Circuit Court of Appeals to hear the case. It has two weeks to do so.

If the government's petition is approved, the appeal could take another year to resolve.

If denied, the government could petition for the Supreme Court to hear the case, but experts said that would be highly unlikely. If the government does not petition to the Supreme Court, the case would be remanded to Denver federal court.

A date for a new trial could be assigned by the end of the year, but it likely wouldn't start until 2009 at the earliest. All typical pretrial motions, such as a request for a change of venue, could be heard again.