[Infowarrior] - Documents: Qwest was targeted by NSA

[Richard Forno]

Documents: Qwest was targeted
'Classified info' was not allowed at ex-CEO's trial

By Sara Burnett And Jeff Smith, Rocky Mountain News
October 11, 2007

http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5719566
,00.html

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.

Looking ahead

DATES SET

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."