Joseph Nacchio, the former Qwest Communications International Inc. chief executive serving a 70-month prison sentence for insider trading, is suing his defense lawyer Herbert Stern, for “professional negligence” and over-billing, citing careless representation and fees for hotel in-room movies and underwear.
The seven-page complaint accuses Stern, a former U.S. Attorney and federal judge in New Jersey, and his Livingston, N.J. firm, Stern & Kilcullen LLC, of being “negligent and careless in handling the defense of the criminal action,” which resulted in his conviction on 19 of 42 counts of insider trading in April 2007 after a 21-day federal trial in Denver. Stern, the top federal prosecutor in New Jersey from 1971-73, billed Nacchio more than $25 million for representation in criminal and civil issues, the court papers said.
“Among other things, they were barred by the trial court from calling a critical expert witness by virtue of their blatant failure to comply with basic litigation procedures,” said Nacchio, who left his home in Mendham, N.J. for a Schuylkill County, Pa. prison camp in April 2009 and is due out in May 2014. His suit was filed yesterday in state Superior Court in Newark, N.J.
Nacchio resurrects the basis for an earlier ineffective-assistance-of-counsel claim that arose earlier in the federal appeals process; it was roundly rejected by the 10th U.S. Circuit Court of Appeals in 2009, though one dissenting appeals judge wrote that “defense counsel behaved inexplicably, which is to say they performed below the level expected of competent counsel.”
Securities law professor J. Robert Brown of the University of Denver’s Sturm College of Law, who sat through and wrote about Nacchio’s trial, said the work of Stern and his five-lawyer team was competent. Brown not only found the dissent “hard to swallow,” but he said Stern’s team “seemed prepared at every turn.”
Had Nacchio’s defense actually submitted information on methodology or requested a hearing on a trial judge’s decision to exclude a key defense expert, “it’s possible the evidence would still have been excluded, only this time on a more complete record that would have been harder to reverse,” Brown said.
In New Jersey legal circles yesterday, Nacchio’s suit, filed by plaintiffs’ malpractice lawyer Bruce Nagel of Nagel Rice LLP in Roseland, N.J., was seen perhaps as “one of those malpractice suits that’s really a defense against a bill collection action.”
Stern did not immediately return a call for comment. Nagel did not provide details on the pricy undergarments and the titles of the in-room movies. But Nacchio’s trial team were visiting Denver from New Jersey and billing for meals and lodging.
“This is a really sad case,” Nagel said in a statement yesterday. “Bad lawyering resulted in a long jail sentence and $70 million in fines and Nacchio was grossly overbilled in the process. It’s time to deal with this unnecessary injustice.”
Nacchio gave Stern a $5 million retainer in November 2005, the suit said. After Nacchio was convicted, Stern billed him more than $2 million for work on an appeal, even though Maureen Mahoney and Sean Berkowitz of Latham & Watkins LLP were brought in to handle it.
Nacchio gained folk hero status in 2007 when he refused to participate in the National Security Agency’s collection of information about who was calling whom. He was one of the few CEOs to take the position, arguing that the requests violated the privacy requirement of the Telecommunications Act. Stern was his attorney.
