Sara Burnett And Jeff Smith, Rocky Mountain News – 2007-10-11 23:13:22
‘Classified info’ was not allowed at ex-CEO’s trial
(October 11, 2007) — The National Security Agency and other government agencies retaliated against Qwest because the Denver telco refused to go along with a phone spying program, documents released Wednesday suggest.
The documents indicate that likely would have been at the heart of former CEO Joe Nacchio’s so-called “classified information” defense at his insider trading trial, had he been allowed to present it.
The secret contracts – worth hundreds of millions of dollars – made Nacchio optimistic about Qwest’s future, even as his staff was warning him the company might not make its numbers, Nacchio’s defense attorneys have maintained. But Nacchio didn’t present that argument at trial.
The documents suggest U.S. District Judge Edward Nottingham refused to allow Nacchio to present the argument about retaliation. Nottingham also said Nacchio would have to take the stand to raise the classified defense.
Prosecutors have said they were prepared to poke holes in Nacchio’s classified defense.
Nacchio was convicted last spring on 19 counts of insider trading for $52 million of stock sales in April and May 2001, and sentenced to six years in prison. He’s free pending appeal.
The partially redacted documents were filed under seal before, during and after Nacchio’s trial. They were released Wednesday.
Nacchio planned to demonstrate at trial that he had a meeting on Feb. 27, 2001, at NSA headquarters at Fort Meade, Md., to discuss a $100 million project. According to the documents, another topic also was discussed at that meeting, one with which Nacchio refused to comply.
The topic itself is redacted each time it appears in the hundreds of pages of documents, but there is mention of Nacchio believing the request was both inappropriate and illegal, and repeatedly refusing to go along with it.
The NSA contract was awarded in July 2001 to companies other than Qwest.
USA Today reported in May 2006 that Qwest, unlike AT&T and Verizon, balked at helping the NSA track phone calling patterns that may have indicated terrorist organizational activities. Nacchio’s attorney, Herbert Stern, confirmed that Nacchio refused to turn over customer telephone records because he didn’t think the NSA program had legal standing.
In the documents, Nacchio also asserts Qwest was in line to build a $2 billion private government network called GovNet and do other government business, including a network between the U.S. and South America.
The documents maintain that Nacchio met with top government officials, including President Bush, Vice President Dick Cheney and then-National Security Adviser Condoleeza Rice in 2000 and early 2001 to discuss how to protect the government’s communications network.
They portray U.S. government officials, even before the Sept. 11 terrorist attacks, worried about a “Pearl Harbor” type of attack on the Internet. As early as 1997, a three-star general talked to Nacchio about using Qwest’s new fiber-optic network for government purposes, according to the defense.
One key meeting with a government official was held at Qwest founder Phil Anschutz’s ranch near Greeley, with former Chief Financial Officer Robin Szeliga prevented from attending presumably because she lacked security clearance.
Nacchio was on a Bush-appointed national security telecommunications advisory panel. In March 2001, then-counter-terrorism adviser Richard Clarke asked the panel if it would be possible to build a private network for the government to protect it from cyberwarfare.
Nacchio piped up: “I already built this network twice” for other government agencies. The defense asserts Nacchio believed Qwest would be asked to build the network and that it could do so in six months.
But the contract didn’t materialize.
Government’s response to Nacchio’s appeal brief is due Nov. 9. Nacchio could choose to file a reply to the government’s brief by Nov. 20. Oral arguments at the 10th Circuit Court of Appeals are scheduled for Dec. 18 in Denver. In the meantime, Nacchio is free pending appeal.
APPELLATE COURT OPTIONS
• Uphold conviction (Nacchio could appeal to Supreme Court)
• Uphold conviction, reduce six-year sentence. (Nacchio could appeal to Supreme Court).
• Overturn conviction because evidence was insufficient to convict
• Order new trial based on errors made by U.S. District Judge Edward Nottingham.
EXCERPTS FROM NACCHIO’S APPELLATE BRIEF
• “The indictment, trial and conviction of Joseph P. Nacchio took place in an atmosphere of prejudgment and vitriol.”
• “Many shareholders lost paper fortunes, employees lost jobs as the company downsized, and all demanded someone to blame.”
• “After years of investigation, prosecutors apparently concluded that they could not prove any crime based on the accounting restatement, and settled on insider trading.”
• “This is an unprecedented prosecution. The extraordinary charges here are based on the claim that Nacchio knew, eight months or more in advance, that Qwest might not make its year-end 2001 financial projections.”
• “The prosecution yoked an unprecedented theory to plainly insufficient facts, and hoped, in a bitter and vindictive atmosphere, that it would be enough to win a conviction from a Denver jury. It was.”